Stock Quotes in this Article: GLW, ITRI, MASI, PG, FSL

WINDERMERE, Fla. (Stockpickr) -- Corporate insiders sell their own companies’ stock for a number of reasons.

They might need the cash for a big personal purchase such as a new house or yacht, or they might need the cash to fund a charity. Sometimes they sell as part of a planned selling program that they have put in place for diversification purposes, which allows them to sell stock in stages instead of selling all at one price.

Other times they sell because they think their stock is overvalued and the risk/reward is no longer attractive. Some even dump their own stock because they have inside knowledge that a competitor is eating their lunch and stealing market share.

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    But insiders usually buy their own shares for one reason: They think the stock is a bargain and has tremendous upside.

    The key word in that last statement is “think.” Just because a corporate insider thinks his or her stock is going to trade higher, that doesn’t mean it will play out that way. Insiders can have all the conviction in the world that their stock is a buy, but if the market doesn’t agree with them, the stock could end up going nowhere. Also, I say “usually” because sometimes insiders are loaned money by the company to buy their own stock. Those loans are often sweetheart deals and shouldn’t be viewed as organic insider buying.

    At the end of the day, its large institutional money managers running big mutual funds and hedge funds that drive stock prices, not insiders. That said, many of these savvy stock operators will follow insider buying activity when they agree with the insider that the stock is undervalued and has upside potential. This is why it’s so important to always be monitoring insider activity, but it’s twice as important to make sure the trend of the stock coincides with the insider buying.

     

    Recently, a number of companies’ corporate insiders have bought large amounts of stock. These insiders are finding some value in the market, which warrants a closer look at these stocks. Here’s a look at several stocks whose insiders have been doing some big buying per SEC filings.

    Procter & Gamble

    A key insider has been loading up on shares of consumer packaged goods company Procter & Gamble (PG). This stock has done absolutely nothing this year, with shares virtually flat at up 2.2%.

    Procter & Gamble has a market cap of $172.92 billion and an enterprise value of $204.17 billion. The stock trades at cheap valuation, with a trailing price-to-earnings of 15.97 and a forward price-to-earnings of 13.72. Procter’s estimated growth rate for this year is 6.1%, and for next year it’s pegged at 9.3%. This is far from a cash-rich company, since the total cash position on its balance sheet is $3.58 billion and its total debt is a whopping $33.85 billion. Procter also has a juicy dividend yield of 3.34%.

    The CEO and chairman of the board just bought 6,299 shares, or $408,049 worth of stock, at $64.78 per share.

    From a technical standpoint, this stock is currently trading above its 200-day moving average and just below its 50-day moving average, which is neutral trendwise. This stock just ran into some stiff resistance at $66.30 and sold off to its current price of just under $63 a share. Shares of Procter also ran into resistance at $66.63 back in May before selling off to a recent low of $57.09. Clearly, over $66 the sellers come out on this stock.

    If you’re looking to buy this stock, I would wait until the current downtrend stops and the stock starts to build a base with some sideways trading action. The stock is at risk right here to drop below both key moving averages, which could spark a bigger fall back towards $60 to $58 a share, or possibly even lower.

    Procter & Gamble is one of Warren Buffett's Top 10 Dividend Stocks.

    Masimo

    Another stock whose key insiders are doing some large buying is Masimo (MASI), a medical technology company that develops, manufactures and markets non-invasive patient monitoring products that help clinicians improve patient care. Clearly the smart money is finding some deep value here since they’re buying with the stock down by over 25% on the year.

    Masimo has a market cap of $1.25 billion and an enterprise value of $1.13 billion. This stock trades at a reasonable valuation, with a trailing price-to-earnings of 19.35 and a forward price-to-earnings of 16.99. Masimo’s estimated growth rate for this year is 1.9%, and for next year it’s pegged at 17.1%. This is a cash-rich company; the total cash position on its balance sheet is $143.19 million, and its total debt is just $135,000.

    The CEO and chairman of the board just bought 64,596 shares, or $1.3 million worth of stock, at $20.24 per share.

    From a technical standpoint, this stock is currently trading below both its 50-day and 200-day moving averages, which is bearish. This stock has been stuck in a nasty downtrend since forming a triple top back in August at around $31.16. Since that top, the stock has plunged and hit a recent low at $18.08 a share.

    >>5 Breakout Trades for This Crazy Market

    If you’re bullish on this name, I would look to buy once it trades back above its 50-day moving average of $22.36 on heavy volume. Look for volume that’s tracking in close to or above its three-month average action of 668,617 shares. I would then add to any long position once the stock breaks out above some overhead resistance at $23 to $25 a share with strong volume. Target a run back toward the 200-day of $28.01 if we get the breakout. Use a mental stop just below the 50-day in case the stock isn’t ready to run just yet.

    Itron

    Another beaten-down stock whose key insiders are doing some large buying is Itron (ITRI), a technology company, offering end-to-end smart metering solutions to electric, natural gas and water utilities around the world. Insiders are finding some deep value here since this stock has been hammered down sellers by over 30% so far in 2011.

    Itron has a market cap of $1.53 billion and an enterprise value of $1.85 billion. This stock trades at a reasonable valuation, since their forward price-to-earnings is just 9.71. Itron’s estimated growth rate for this year is 2.20%, and for next year it’s pegged at -5.4%. This is not a cash-rich company, with a total cash position on its balance sheet of $129.51 million and total debt of $469.25 million.

    The CEO and president just bought 27,000 shares, or about $1 million worth of stock, at $37.31 per share. The chairman of the board also just bought 1,000 shares, or $37,360 worth of stock, at $37.36 per share.

    From a technical standpoint, this stock is currently trading above its 50-day moving average and well below its 200-day moving averages, which is neutral trendwise. This stock had been stuck in a downtrend from its July high of $49.71 to a recent low of $26.90. Since hitting that low, the stock has rebounded and started to make higher highs and higher lows, which could be signaling a bullish trend change.

    >>Stocks Hitting 52-Week Highs

    If you like this stock, I would look to be a buyer once it breaks out above $40 and $41 a share on strong volume. Look for volume that’s tracking in close to or above its three-month average action of 584,994 shares. If we get a high volume breakout above those levels, then I think this stock could make a run at its 200-day moving average of $47.36. You could also buy this stock off any notable weakness and anticipate the breakout. Either way, use a tight mental stop.

    Corning

    One stock in the electronic instruments and controls complex whose insiders have been active is Corning (GLW), a technology-based company. Corning operates in five business segments: display technologies, telecommunications, environmental technologies, specialty materials and life sciences. Insiders are once again finding some deep value since they’re snapping up shares when the stock is down by over 25% on the year.

    Corning has a market cap of $21.94 billion and an enterprise value of $17.72 billion. The stock trades at an extremely cheap valuation, since its trailing price-to-earnings is 6.59 and its forward price-to-earnings is 7.27. Its estimated growth rate for this year is -11.6%, and for next year it’s pegged at 4.9%. This is an extremely cash-rich company, with a total cash position of $6.42 billion and total debt of $2.31 billion. After you back out the debt, Corning has $4.11 billion in cash on the books.

    A director just bought 30,000 shares, or $462,000 worth of stock, at $15.40 per share. In early August, the CEO also bought 75,000 shares, or $1.01 million worth of stock, between $13.49 and $13.77 per share.

    From a technical standpoint, this stock is currently trading above its 50-day moving average and below its 200-day moving average, which is neutral trendwise. This stock has been downtrending for the past few months and making mostly lower highs and lower lows. That said, the stock recently started to change that rend and make some higher highs and higher lows, as it broke back above its 50-day moving average on big volume.

    >>Does Technical Trading Really Work?

    If you’re bullish on this stock, I would to buy near current levels ($13.96) with a mental stop just below the 50-day moving average of $13.64 a share. If you prefer to buy strength, I would trade this off a breakout above $15.62 a share on heavy volume Look for volume that tracks in close to or above its three-month average action of 22.3 million shares. Target a run back towards the 200-day moving average of $17.89, or possibly higher if we get the breakout.

    Freescale Semiconductor

    A stock in the technology complex that a key insider has been snapping up shares of is Freescale Semiconductor (FSL), an embedded processing semiconductors and solutions provider. This is once again a situation where the smart money is finding some deep value since shares are off by over 30% so far in 2011.

    Freescale has a market cap of $2.95 billion and an enterprise value of $8.83 billion. This stock trades at a reasonable valuation, since their forward price-to-earnings is 12.91. Freescale’s estimated growth rate for next year is 3.3%. This is far from a cash-rich company, since the total cash position on its balance sheet is $744 million and its total debt is a whopping $6.59 billion.

    The CEO just bought 40,000 shares, or $486,348 worth of stock, at $12.16 per share.

    From a technical standpoint, this stock has been trading range-bound since August between $9.50 on the lower end and $14.35 on the upper end. The stock is currently trading just above its 50-day moving average of $11.92 a share. Traders should look to buy the breakout of this range to potentially profit big.

    If you’re bullish on this stock, I would get long off any weakness near the lower end of the range. I will use the recent lows as a guide so let’s say around $11.50, or even near its current price of $12 a share. I would use a mental stop at around $11. If you would rather buy strength, buy once it takes out $13 to $14.35 on big volume. Look for volume that’s tracking in close to or above its three-month average action of 1.10 million shares.

    If we get that breakout with volume, then I think this stock runs big. I would target a run back towards some past overhead resistance at around $17 to $18 a share if the bulls gain full control of this stock. Use a mental stop just below $13 if you buy off strength in case the stock isn’t ready to breakout just yet.

    To see more stocks with notable insider buying, including Steel Excel (ADPT) and eHealth (EHTH), check out the Stocks With Big Insider Buying portfolio on Stockpickr.

    -- Written by Roberto Pedone in Winderemere, Fla.

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    At the time of publication, author had no positions in stocks mentioned.

    Roberto Pedone, based out of Windermere, Fla., is an independent trader who focuses on stocks, options, futures, commodities and currencies. He is also an outside contributor to Beconequity.com and maintains the website Maddmoney.net, which he sold to Blue Wave Advisors in 2008. Roberto studied International Business at The Milwaukee School of Engineering, and he spent a year overseas studying business in Lubeck, Germany.