Stock Quotes in this Article: CHK, CYTR, DYN, ETE, HMPR

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.

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

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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 some stocks where insiders have been doing some big buying in per SEC filings.
 

Dynegy

One electric utilities player that insiders are loading up on here is Dynegy (DYN). This company’s primary business is the production and sale of electric energy, capacity and ancillary services from the fleet of 16 operating power plants in six states totaling approximately 11,600 megawatts of generating capacity. Insiders are buying this stock into some extreme weakness since shares are off by over 75% so far in 2012.

Dynegy has a market cap of $74 million and an enterprise value of $1.5. This stock trades at a reasonable valuation, with a price-to-sales of 0.06 and a price-to-book of 0.07. Its estimated growth rate for this year is 55.8%, and for next year it’s pegged at 2.9%. This is far from a cash-rich company, since the total cash position on its balance sheet is $411 million and its total debt is a whopping $1.84 billion.

A beneficial owner just bought 636,982 shares, or around $366,000 worth of stock, at 49 cents to 58 cents per share.

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From a technical perspective, DYN is currently trading above its 50-day moving average and below its 200-day moving average, which is neutral trendwise. This stock recently bottomed at 30 cents after falling hard from over $1.54 a share. After hitting that bottom, shares of DYN have started to make mostly higher lows and higher highs, which is bullish technical price action. That move has now pushed DYN within range of triggering a major breakout trade.

If you’re bullish on DYN, then I would look for long-biased trades once this stock breaks out above some near-term overhead resistance at 64 cents to 74 cents with high-volume. Look for volume on that move that hits near or above its three-month average action of 1,828,310 shares. If we get that action soon, then DYN could easily spike back towards $1.00 to $1.20 a share.

I would simply avoid DYN if this stock drops back below its 50-day at 49 cents or some more major support at 45 cents per share with heavy volume.

As of the most recently reported quarter, Dynegy was one of Carl Icahn's holdings.

CytRx

Another stock that insiders are warming up too here is CytRx (CYTR), a biopharmaceutical research and development company engaged in the development of high-value human therapeutics, specializing in oncology. Insiders are buying this stock into some big-time strength since shares are up over 150% so far in 2012.

CytRx has a market cap of $104.95 million and an enterprise value of $70.85 million. This stock trades at a premium valuation, with a price-to-sales of 411.34 and a price-to-book of 7.12. Its estimated growth rate for this year is -74%, and for next year it’s pegged at 13.4%. This is a cash-rich company, since the total cash position on its balance sheet is $31.98 million and its total debt is zero.

A beneficial owner just bought 44,824 shares, or about $230,000 worth of stock, at $4.90 per share.

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From a technical perspective, CYTR is currently trading above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending strong for the last two months, with shares soaring from $2.03 to a recent high of $5.44 a share. During that sharp run higher, shares of CYTR have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed CYTR within range of triggering a near-term breakout trade.

If you’re in the bull camp on CYTR, then I would look for long-biased trades once this stock breaks out above some near-term overhead resistance at $5.44 a share with high volume. Look for volume on that move that registers near or above its three-month average action of 250,332 shares. If we get that action soon, then CYTR has a great chance of re-testing and possibly taking out its next major overhead resistance level at $6 a share. If $6 gets taken out with volume, then CYTR could hit $7 to $7.50 a share.

On the flipside, I would avoid CYTR or look for short-biased trades if it fails to trigger that breakout, and then drops back below some major near-term support at $4.40 a share with heavy volume. A high-volume move below $4.40 could set this stock up to re-test its 50-day moving average of $3.56 a share.

Energy Transfer Equity

Another stock that insiders are warming up to here is Energy Transfer Equity (ETE), which has natural gas operations that include more than 17, 500 miles of gathering and transportation pipelines, treating and processing assets, and three storage facilities located in Texas. This stock hasn’t done much so far in 2012, with shares virtually flat on the year.

Energy Transfer Equity has a market cap of $11.32 billion and an enterprise value of $28.93 billion. This stock trades at a reasonable valuation, with a trailing price-to-earnings of 23.52 and a forward price-to-earnings of 16.05. Its estimated growth rate for this year is 52.2%, and for next year it’s pegged at 20%. This is far from a cash-rich company, since the total cash position on its balance sheet is $293.07 million and its total debt is a whopping $17.83 billion.

A director and beneficial owner just bought 239,975 shares, or about $9.47 million worth of stock, at $39.35 to $39.87 per share.

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From a technical perspective, ETE is currently trading above both its 50-day and 200-day moving averages, which is bullish. This stock recently hit a bottom at $34 a share, after dropping from its March high of $43.70 a share. After tapping that bottom, shares of ETE have been uptrending and making higher lows and higher highs, which is bullish technical price action. That move is quickly pushing ETE within range of triggering a near-term breakout trade.

If you‘re bullish on ETE, then I would look for long-biased trades once this stock triggers a near-term break out above $41.40 to $42.49 a share high-volume. Look for volume on that move that hits near or above its three-month average volume of 1,113,730 shares. If we get that action soon, then ETE will setup to re-test and possibly take out its next significant overhead resistance levels at $43.82 to $44.51 a share.

On the flipside, I would avoid ETE if it fails to trigger that breakout, and then moves back below both its 50-day at $38.87 and its 200-day at $38.58, and then some major support at $38.24 with high-volume. A high-volume move below those levels could setup ETE to trade down towards $36 to $34 a share.

Hampton Roads Bankshares

Another stock to look at with some monster insider buying is regional bank player Hampton Roads Bankshares (HMPR), which provides community and commercial banking services primarily to individuals and small to medium-sized businesses. Insiders are buying this stock into some big-time weakness since shares have fallen over 55% so far in 2012.

Hampton Roads Bankshares has a market cap of $41.47 million and an enterprise value of $149.46 million. This stock trades at a cheap valuation, with a price-to-sales of 2.05 and a price-to-book of 0.39. This is not a cash-rich company, since the total cash position on its balance sheet is $128.10 million and its total debt is $236.43 million. After you back out the cash, Hampton Roads Bankshares has a total of $108.33 million of debt on its books.

A director and beneficial owner bought 19,197,432 shares, or about $13.43 million worth of stock, at 70 cents per share. Another beneficial owner also just bought 18,520,748 shares, or about $12.96 million worth of stock, at 70 cents per share.

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From a technical perspective, HMPR is currently trading below both its 50-day and 200-day moving averages, which is bearish. This stock has been destroyed by the sellers during the last two months, with shares plunging from over $3.50 a share to a recent low of $1.09 a share with heavy volume. During that massive move lower, shares of HMPR consistently made lower highs and lower lows, which is bearish technical price action. That said, during the last month, shares of HMPR have started to trend sideways between $1.09 on the downside and $1.32 on the upside. A move outside of that range will likely setup the next major trend for HMPR.

If you’re bullish on HMPR, then I would look for long-biased trades once this stock triggers a break out above some near-term resistance at $1.27 to $1.32 a share with high-volume. Look for volume on that move that hits near or above its three-month average action of 78,862 shares. If we get that move soon, then HMPR could easily skyrocket back towards $2 to $2.45 a share.

I would simply avoid HMPR if it fails to trigger that breakout, and then moves back below that recent low of $1.09 a share with heavy volume.

Chesapeake Energy

Another name that insiders are snapping up here isChesapeake Energy (CHK), which is engaged in the exploration, development and acquisition of properties for the production of natural gas and oil from underground reservoirs. Insiders are finding some decent value here since this stock has plunged 14% so far in 2012.

Chesapeake Energy has a market cap of $12.16 billion and an enterprise value of $25.87 billion. This stock trades at a cheap valuation, with a trailing price-to-earnings of 7.62 and a forward price-to-earnings of 11.62. Its estimated growth rate for this year is -82.5%, and for next year it’s pegged at 232.7%. This is far from a cash-rich company, since the total cash position on its balance sheet is $438 million and its total debt is a whopping $13.33 billion.

A director just bought 27,700 shares, or around $498,000 worth of stock, at $18 per share. Another director also just bought bought 20,000 shares, or around $355,000 worth of stock, at $17.75 per share.

From a technical perspective, CHK is currently trading above its 50-day moving average and below its 200-day moving average, which is neutral trendwise. This stock hit a bottom in May at $13.32 a share, after CHK plunged from over $25 a share. After hitting that bottom, shares of CHK have reversed its downtrend and started to uptrend with shares making higher lows and higher highs, which is bullish technical price action. That move has now pushed CHK within range of triggering a near-term breakout trade.

If you’re in the bull camp on CHK, I would look for long-biased trades if this stock can manage to trigger a near-term break out above some resistance at $19.50 to $20.63 a share with high-volume. Look for volume on that move to register near or above its three-month average action of 36,050,900 shares. If we get that action, then CHK has a great chance of re-testing and possibly taking out its 200-day moving average of $22.30 a share.

On the flipside, I would avoid CHK or look for short-biased trades if it fails to trigger that breakout, and then drops below its 50-day moving average of $17.03, and below some near-term support at $16.32 a share with heavy volume. A high-volume move below those levels could set this stock up to trade down towards $15.50 to $14.50 a share.

As of the most recently reported quarter, Chesapeake was one of T. Boone Pickens' holdings.

To see more stocks with notable insider buying, 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.