Stock Quotes in this Article: DOLE, NCT, PNK, QSII, T

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.

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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.

AT&T

One communications services player that insiders are falling in love with here is AT&T (T), a provider of telecommunications services in the U.S. and worldwide. Services offered include wireless communications, local exchange services and long-distance services. Insiders are buying this stock into strength, with shares up around 25% so far in 2012.

AT&T has a market cap of $220 billion and an enterprise value of $282 billion. This stock trades at a rich valuation, with a trailing price-to-earnings of 50 and a forward price-to-earnings of 14.75. Its estimated growth rate for this year is 9.1%, and for next year it’s pegged at 7.1%. This is far from a cash-rich company, since the total cash position on its balance sheet is $2.15 billion, and its total debt is a whopping $64.53 billion. This stock sports a dividend yield of 4.7%.

A director just bought 55,000 shares, or $2.05 million worth of stock, at $37.43 per share.

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From a technical perspective, T 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 six months, with shares soaring from under $30 to its recent high of $38.28 a share. During that uptrend, shares of T have consistently made higher lows and higher highs, which is bullish technical price action.

If you’re bullish on T, then I would wait for this stock to pullback closer to its 20-day moving average at $35.88 or its 50-day moving average of $34.95 a share. If we don’t get those pullbacks and T holds above its recent breakout price of $36.19 a share, then this stock could easily hit $40 in the near future.

AT&T, which shows up on a recent list of 2 Dividend Stocks to Sell for Profits, was also featured in "5 Big Stocks Ready to Slingshot Higher."

Quality Systems

Another name in the technology complex that insiders are snapping up shares in is Quality Systems (QSII). This company develops and markets healthcare information systems in the U.S. Insiders are sniffing out some deep value here, since this stock has plunged by over 53% so far in 2012.

Quality Systems has a market cap of $1.01 billion and an enterprise value of $824 million. This stock trades at a reasonable valuation, with a trailing price-to-earnings of 13.98 and a forward price-to-earnings of 12.01. Its estimated growth rate for this year is -3.1%, and for next year it’s pegged at 14.5%. This is a cash-rich company, since the total cash position on its balance sheet is $134.90 million, and its total debt is zero. This stock sports a dividend yield of 4.4%.

A director just bought 10,000 shares, or about $160,000 worth of stock, at $16.06 per share. Another director also just bought 10,000 shares, or about $160,000 worth of stock, at $16.02 per share.

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From a technical perspective, QSII 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 for the past six months, with shares plunging from over $44 to its recent low of $15.04 a share. During that downtrend, shares of QSII have been consistently making lower highs and lower lows, which is bearish technical price action. This stock also just gapped down huge from around $24 to $15.04 a share on massive volume. Since that plunge, shares of QSII have held that $15.04 bottom.

If you’re in the bull camp on QSII, then I would look for long-biased trades as long as QSII is trending above $16.98 a share with strong upside volume flows. I would consider any upside volume day that registers near or above 983,175 shares as bullish. I would also consider looking for long trades once QSII takes out its gap-down day low of $19 a share with volume. A move over $19 could spark a big pop since QSII will then move into that gap.

I would simply avoid this stock entirely or look for short-biased trades if it moves below $15.94 to $15.04 with high volume. A high-volume move below those levels would setup QSII to enter new 52-week low territory, which is bearish technical price action.

Newcastle Investment

One real estate investment and finance player that insiders are loading up on here is Newcastle Investment (NCT), which invests in, and actively manages, a portfolio of real estate securities, loans, excess mortgage servicing rights and other real estate related assets. Insiders are buying up shares in this name into some major strength, since the stock is up over 60% so far in 2012.

Newcastle Investment has a market cap of $926 million and an enterprise value of 44.27 billion. This stock trades at an extremely cheap valuation, with a trailing price-to-earnings of 3.18 and a forward price-to-earnings of 4.97. Its estimated growth rate for this year is -47.6%, and for next year it’s pegged at -7.4%. This is not a cash-rich company, since the total cash position on its balance sheet is $158.26 million and its total debt is a whopping $3.35 billion. This stock sports a large dividend yield of 10.8%.

A director just bought 300,000 shares, or around $2.01 million worth of stock, at $6.70 per share. The secretary also just bought 150,000 shares, or around $1 million worth of stock, at $6.70 per share. It looks like both of these purchases were part of a spot secondary offering of 22 million shares on July 26.

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From a technical perspective, NCT is currently trading above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending strong for the past six months, with shares trending higher from $5.02 to its recent high of $7.50 a share. During that uptrend, shares of NCT have mostly been making higher lows and higher highs, which is bullish technical price action. That move has now pushed NCT within range of triggering a major breakout trade.

If you‘re bullish on NCT, then I would look for long-biased trades once this stock manages to clear some overhead resistance levels at $7.41 to $7.89 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 3,173,240 shares. If we get that action soon, then NCT has a great chance of trading up towards $10 a share.

One could buy this stock off any weakness and simply use a stop just below its 50-day moving average of $6.78 a share. Or you can buy off strength once it clears $7.41 to $7.89 a share with heavy volume, and simply use a stop just below $7.41, or down toward $7 a share if you want to give it more room.

Pinnacle Entertainment

Another name that insiders find attractive here is casinos and gaming player Pinnacle Entertainment (PNK), an owner, operator and developer of casinos and related hospitality and entertainment facilities. Insiders are buying this stock into some modest strength, with shares up around 7% so far in 2012.

Pinnacle Entertainment has a market cap of $679 million and an enterprise value of $1.92 billion. This stock trades at a reasonable valuation, with a trailing price-to-earnings of 19.48 and a forward price-to-earnings of 12.49. Its estimated growth rate for this year is 50.8%, and for next year it’s pegged at -5.4%. This is not a cash-rich company, since the total cash position on its balance sheet is $202.80 million and its total debt is $1.44 billion.

The vice president just bought 10,000 shares, or around $102,000 worth of stock, at $10.24 to $10.35 per share. The CEO also just bought 25,100 shares, or around $242,000 worth of stock, at $9.41 to $9.73 per share.

From a technical perspective, PNK is currently trading above both its 50-day and 200-day moving averages, which is bullish. This stock just found some big buying interest during the last two months, since it formed a major bottom at around $8.93 to $9 a share. Following that bottom, shares of PNK have soared with high volume back above both its 50-day and 200-day moving averages. This stock has also just started to breakout above some near-term overhead resistance at $10.33 a share.

If you’re in the bull camp on PNK, then I would look for long-biased trades once this stock pulls back closer to its 200-day moving average of $10.38 a share. Basically, look to buy this stock off weakness and anticipate a possible re-test and possibly breakout above its next major overhead resistance levels at $11.76 to $11.91 a share.

On the flipside, I would probably just avoid this stock if it drops back below its 200-day moving average at $10.38 a share, or below some recent breakout levels of $10.33 to $9.89 a share with high volume. A move below those levels will likely mean that PNK is heading back towards those major support zones at $8.93 to $9 a share.

Dole Food

The last name to consider with some large insider buying is food processing player Dole Food (DOLE), a producer of bananas and pineapples, and packaged fruit products, packaged salads and fresh-packed vegetables. Insiders are buying this stock into some decent strength here, since shares are up around 36% so far in 2012.

Dole Food has a market cap of $1.03 billion and an enterprise value of $2.57 billion. This stock trades at reasonable valuation, with a trailing price-to-earnings of 28.42 and a forward price-to-earnings of 8.17. Its estimated growth rate for this year is -5.1%, and for next year it’s pegged at 9.2%. This is far from a cash-rich company, since the total cash position on its balance sheet is $94.12 million and its total debt is a whopping $1.64 billion.

The CEO and chairman of the board just bought 278,800 shares, or about $2.83 million worth of stock, at $9.67 to $10.45 per share.

From a technical perspective, DOLE is currently trading above both its 50-day and 200-day moving averages, which is bullish. This stock has been trading range bound for the past four months, with shares changing hands between $8.35 and $10.50 a share. In just the past few trading sessions, DOLE has started to take out that upper-end of that range, and break out above its March high of $11.39 with large volume.

Keep in mind that DOLE is one of the stocks that saw an unusual volume spike today that’s being blamed one some technical computer glitches. Volume today is already over 4.3 million which is dramatically above its three-month average action of 805,922 shares.

If you’re bullish on DOLE, then I would look for long-biased trades in this stock as long as it’s trending above $10.50 to $11.39 a share with strong upside volume flows. I would consider any upside volume day that registers near or above 805,922 shares. If we continue to see that action, then DOLE has a great chance of re-testing and possibly taking out its 2011 highs at $14.58 to $14.99 a share.

I would simply avoid DOLE for now if it moves back below $10.50 to $10 a share with heavy volume. A move back below those levels could mean that the recent breakout has failed and the stock wants to re-visit those recent range lows.

To see more stocks with notable insider buying like Westport Innovations (WPRT), Fuel Systems Solutions (FSYS) and Puma Biotechnology (PBYI), 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.