Stock Quotes in this Article: HALO, IMMR, MCP, PLCM, HLSS

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.

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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.

Polycom

One stock that insiders are warming up to here is Polycom (PLCM), a global provider of communications solutions that enable enterprise, government, education and health care customers to more effectively collaborate. Insiders are buying this stock into weakness, since shares are down over 45% in the last six months.

Polycom has a market cap of $1.86 billion and an enterprise value of $1.28 billion. This stock trades at a reasonable valuation, with a trailing price-to-earnings of 19.81 and a forward price-to-earnings of 14.38. Its estimated growth rate for this year is -43.2%, and for next year it’s pegged at 9%. This is a cash-rich company, since the total cash position on its balance sheet is $572.07 million and its total debt is zero.

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A director just bought 25,000 shares, or about $237,000 worth of stock, at $9.51 per share.

From a technical perspective, PLCM is currently trading above its 50-day moving average and below its 200-day moving average, which is neutral trendwise. This stock recently came out of a nasty downtrend that took it from over $20 to its 52-week low of $7.45 a share. After hitting that low, shares of PLCM reversed its bearish trend and started to uptrend moving back above its 50-day moving average. During that move, shares of PLCM have been consistently making higher lows and higher highs, which is bullish technical price action.

If you’re bullish on PLCM, then I would look for long-biased trades as long as it’s trending above its 50-day moving average of $9.69 a share with strong upside volume flows. I would consider any upside volume day that registers near or above its three-month average volume of 2.9 million shares as bullish. If PLCM can maintain that trend, then this stock has a great chance of re-testing and possibly taking out its next major overhead resistance levels at $11.98 to $13.43 a share.

On the flip side, I would avoid PLCM or look for short-biased trades if this stock fails to hold that trend, and then drops back below some near-term support at $9.40 a share with heavy volume. If we get that move, then this stock could easily re-test or possible take out its 52-week low of $7.45 a share.

For another take on Polycom, it shows up on a list of 2 Oversold Stocks to Avoid.

Molycorp

Another stock that insiders are loading up on big here is Molycorp (MCP), a rare earth oxide producer in the Western Hemisphere. Insiders are buying this stock into some major weakness, since shares are off by over 50% so far in 2012.

Molycorp has a market cap of $1.25 billion and an enterprise value of $1.93 billion. This stock trades at a reasonable valuation, with a forward price-to-earnings of 19.55. Its estimated growth rate for this year is -71.2%, and for next year it’s pegged at 18.4%. This is not a cash-rich company, since the total cash position on its balance sheet is $369.26 million and its total debt is $1.11 billion.

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A beneficial owner and director just bought 2.5 million shares, or $25 million worth of stock, at $10.00 per share. The CEO also just bought 50,000 shares, or $500,000 worth of stock, at $10.00 per share. Another beneficial owner also just bought 4.5 million shares, or $45 million worth of stock, at $10 per share.

From a technical perspective, MCP is currently trading below both its 50-day and 200-day moving averages, which is bearish. This stock has been downtrending badly for the past six months, with shares dropping from over $30 to a recent low of $9.40 a share. During that move, shares of MCP have consistently made lower highs and lower lows, which is bearish technical price action. That said, shares of MCP have now started to bounce off of oversold levels once its relative strength index reading dipped well below 30.

If you’re in the bull camp on MCP, then I would look for long-biased trades as long as this stock holds its trend above yesterday’s low of $10.05 a share with strong upside volume flows. I would consider any upside volume day that registers near or above its three-month average action of 4,383,020 shares as bullish. If MCP can maintain that trend, then look for this stock to re-test and possibly take out its next major overhead resistance levels at $12 to $13.20 a share. Any high-volume move above $14 would give MCP a chance to re-fill a previous gap back toward $16 a share.

On the flip side, I would MCP or look for short-biased trades if it fails to hold its near-term gains, and then drops back below $10.04 to $9.40 a share with heavy volume. A move below $9.40 will mean that MCP has entered new 52-week-low territory, which is bearish technical price action.

Home Loan Servicing Solutions

A financial services player that insiders are snapping up shares in here is Home Loan Servicing Solutions (HLSS), which engages in acquiring mortgage servicing assets, primarily subprime and Alt-A mortgage servicing rights and associated servicing advances. Insiders are buying this stock into some decent strength, since shares are up over 15% during the last six months.

Home Loan Servicing Solutions has a market cap of $226.30 million and an enterprise value of $560.72 million. This stock trades at a cheap valuation, with a trailing price-to-earnings of 12.82 and a forward price-to-earnings of 12.08. Its estimated growth rate for next year is 1.5%. This is not a cash-rich company, since the total cash position on its balance sheet is $36.46 million and its total debt is $369.03 million. This stock sports a dividend yield of 7.7%.

A director just bought 51,000 shares, or about $801,000 worth of stock, at $15.71 to $15.75 per share. That same director also just bought 42,221 shares, or about $657,000 worth of stock, at $15.57 per share.

From a technical perspective, HLSS is currently trading above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending very strong for the past two months, with shares moving from a low of $13.18 to a recent high of $16.15 a share. During that uptrend, shares of HLSS have been consistently making higher lows and higher highs, which is bullish technical price action.

If you‘re bullish on HLSS, then I would look for long-biased trades once this stock pulls back closer to its 50-day moving average of $14.37 a share. This stock recently broke out above $15.92 a share, but it is now pulling back and is likely heading toward its 50-day, where it will offer up a better long entry.

If you don’t get that pullback in HLSS, then traders should look to get long once the stock triggers a breakout above $16.15 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 210,712 shares. Any move above $16.15 will push HLSS into all-time high territory, which is bullish technical price action

Halozyme Therapeutics

Another stock that insiders are finding attractive here is biotechnology and drugs player Halozyme Therapeutics (HALO), which develops and commercializes various products for patient care. Insiders are sniffing out some deep value here, since this stock is down by over 35% so far in 2012.

Halozyme Therapeutics has a market cap of $649.97 million and an enterprise value of $534.48 million. This stock trades at a premium valuation, with a price-to-sales of 15.70 and a price-to-book of 9.19. Its estimated growth rate for this year is -178.9%, and for next year it’s pegged at 15.1%. This is a cash-rich company, since the total cash position on its balance sheet is $102.04 million and its total debt is zero.

A director just bought 20,000 shares, or about $113,000 worth of stock, at $5.70 per share.

From a technical perspective, HALO is currently trading below both its 50-day and 200-day moving averages, which is bearish. This stock recently gapped down big from around $9 to a low of $3.86 a share with monster volume. Following that gap down, shares of HALO have rebounded sharply to its current price of $5.77 a share. That move is quickly pushing HALO within range of triggering a near-term breakout trade.

If you’re in the bull camp on HALO, then I would look for long-biased trades once this stock manages to break out above some near-term overhead resistance levels at $6.17 to $6.23 a share with high volume. Look for a sustained move or close above those levels with volume that’s near or above its three-month average action of 1.1 million shares. If that breakout triggers soon, then HALO will have a great chance of re-filling that gap and possibly trending back toward $7 to $9 a share. Keep in mind that you can buy HALO off weakness, and then simply use a stop just below $5.55 to $5.33 a share.

On the flip side, I would avoid HALO or look for short-biased trades if it fails to trigger that breakout soon, and then drops below some major near-term support at $5.55 to $5.23 a share with heavy volume. If we get that action, then HALO could easily trend back toward its recent low of $3.86 a share.

Immersion

One more stock that insiders are buying up here is software and programming player Immersion (IMMR), a provider of haptic technologies that allow people to use their sense of touch when operating a variety of digital devices. Insiders are buying this stock into some modest strength here, since shares are up 17% so far in 2012.

Immersion has a market cap of $169 million and an enterprise value of $116.92 million. This stock trades at premium valuation, with a forward price-to-earnings of 46.85. Its estimated growth rate for this year is -100%, and for next year it’s pegged at 208.3%. This is a cash-rich company, since the total cash position on its balance sheet is $52.36 million and its total debt is zero.

A beneficial owner just bought 50,000 shares, or around $262,000 worth of stock, at $5.25 per share.

From a technical perspective, IMMR is currently trading above both its 50-day and 200-day moving averages, which is bullish. This stock has been trading within a tight range for the past two months with shares trending between $5.15 on the downside and $5.94 on the upside. Just recently IMMR broke out above $5.94 and hit a high of $6.11 a share. That breakout could be signaling that IMMR is getting ready to trend much higher.

If you’re bullish on IMMR, then I would look for long-biased trades once this stock manages to break out above $6.11 a share with high volume. Look for volume on that move that registers near or above its three-month average action of 127,814 shares. If that breakout triggers soon, then IMMR will have a great chance of re-testing and possibly taking out its next major overhead resistance level $7.12 a share. Traders can also get long IMMR off weakness as long as it continues to trend above both its 50-day and 200-day moving averages.

On the flip side, I would avoid IMMR or look for short-biased trades if it fails to trigger that breakout soon, and then drops back below those key moving averages with heavy volume. If we get that action, then IMMR will setup to re-test and possibly take out its next significant support levels at $5.25 to $5.15 a share.

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.