Stock Quotes in this Article: GWR, NATR, NIHD, RGEN, THC

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.

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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.

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.

 

Nature’s Sunshine Products

One stock that insiders are jumping into here is Nature’s Sunshine Products (NATR), which is primarily engaged in the manufacturing and direct selling of nutritional and personal care products. This stock hasn’t done much so far in 2012, with shares up by just 2%.

Nature’s Sunshine Products has a market cap of $254 million and an enterprise value of $191 million. This stock trades at cheap valuation, with a trailing price-to-earnings of 13 and a forward price-to-earnings of 8.68. Its estimated growth rate for this year is 7%, and for next year it’s pegged at 2.7%. This is a cash-rich company, since the total cash position on its balance sheet is $68.63 million and its total debt is just $7.55 million.

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A director and beneficial owner just bought 202,007 shares, or about $3.21 million worth of stock, at $15.90 to $15.95 per share. That same director also just bought 208,109 shares, or about $3.22 million worth of stock, at $15.39 to $15.90 per share.

From a technical perspective, NATR is currently trending 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 rising from a low of $13.63 to its recent high of $16.58 a share. During that uptrend, shares of NATR have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed NATR within range of triggering a major breakout trade.

If you’re bullish on NATR, then I would look for long-biased trades once it breaks out above some key overhead resistance levels at $16.58 to $18.37 a share with high volume. Look for a sustained move or close above those levels with volume that hits near or above its three-month average action of 33,967 shares. If that breakout triggers soon, then NATR will have a great chance to re-test or possibly take out its next major overhead resistance level at $21.01.

Traders can look to buy NATR off any weakness as long as it doesn’t breach its 200-day moving average of $15.15 a share with heavy volume. I would look to add to the position if you buy off weakness once NATR takes out $18.37 with strong upside volume.

Genesee & Wyoming

Another stock that insiders are snapping up here is Genesee & Wyoming (GWR), which owns and operates short line and regional freight railroads and provides railcar switching services in the U.S., Australia, Canada, Belgium and the Netherlands. Insiders are buying this stock into some decent strength here, since shares are up over 30% in the last three months.

Genesee & Wyoming has a market cap of $2.84 billion and an enterprise value of $3.36 billion. This stock trades at a reasonable valuation, with a trailing price-to-earnings of 22.80 and a forward price-to-earnings of 18.22. Its estimated growth rate for this year is 6.1%, and for next year it’s pegged at 23.4%. This is not a cash-rich company, since the total cash position on its balance sheet is $50.22 million and its total debt is $633.31 million.

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A director just bought 233,996 shares, or about $14.46 million worth of stock, at $61.84 per share.

From a technical perspective, GWR is currently trading above both its 50-day and 200-day moving averages, which is bullish. This stock has been trading inside of a tight range for the past two months, with shares moving between $62 on the downside and $67.95 a share on the upside. A move outside of that range will likely setup the next major trend for GWR.

If you’re in the bull camp on GWR, then I would look for long-biased trades once it manages to break out above some near-term overhead resistance at $67.95 a share with high volume. Look for a sustained move or close above that level with volume that hits near or above its three-month average action of 400,522 shares. If that breakout triggers soon, then GWR will have a great chance of trending north of $70 a share.

One can look to buy GWR off weakness to anticipate that breakout, and simply use a stop that sits around $63.74 to $63.51 a share. One could also buy off strength once GWR clears $67.95 with volume, and then simply use a stop at round $66 a share.

Repligen

A biotech stock that insiders are active in here is Repligen (RGEN), which engages in the manufacture and supply of biologic products used to manufacture biologic drugs. Insiders are buying this stock into some solid strength, since shares are up a whopping 78% so far in 2012.

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Repligen has a market cap of $191 million and an enterprise value of $166 million. This stock trades at a premium valuation, with a trailing price-to-earnings of 154 and a forward price-to-earnings of 32. This is a cash-rich company, since the total cash position on its balance sheet is $28.38 million and its total debt is zero.

A director just bought 10,000 shares, or around $60,000 worth of stock, at $6.08 per share.

From a technical perspective, RGEN is currently trading above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending extremely strong for the last three months, with shares soaring higher from a low of $3.78 to its recent high of $6.36 a share. During that uptrend, shares of RGEN have consistently made higher lows and higher highs, which is bullish technical price action. That move has now pushed RGEN within range of triggering a near-term breakout trade.

If you‘re bullish on RGEN, then I would look for long-biased trades once it manages to break out above some near-term overhead resistance at $6.36 a share with high volume. Look for a sustained move or close above $6.36 with volume that hits near or above its three-month average action of 158,098 shares. If that breakout triggers soon, then RGEN will have a great chance of re-testing or possibly taking out its next major overhead resistance level at $7.29 a share.

Traders can look to buy RGEN off any weakness to anticipate that breakout and simply use a stop that sits just below $5.80 to $5.32 a share. You could also use a stop at around its 50-day moving average of $5.08 a share, depending on if you want to give it more room.

NII Holdings

Another stock that insiders are finding attractive here is communications services player NII Holdings (NIHD), which provides wireless communication services under the Nextel brand name to businesses and individuals in Mexico, Brazil, Argentina, Peru and Chile. Insiders are sniffing out some deep value here, since shares are down by a whopping 60% so far in 2012.

NII Holdings has a market cap of $1.31 billion and an enterprise value of $3.96 billion. This stock trades at a reasonable valuation, with a price-to-sales of 0.20 and a price-to-book of 0.44. Its estimated growth rate for this year is -173.9%, and for next year it’s pegged at 55.3%. This is not a cash-rich company, since the total cash position on its balance sheet is $1.96 billion and its total debt is $4.62 billion.

A CEO and director just bought 42,402 shares, or about $296,000 worth of stock, at $7 per share.

From a technical perspective, NIHD is currently trading above its 50-day moving average and below its 200-day moving average, which is neutral trendwise. This stock recently formed a bottoming pattern at around $5.84 to $6.23 a share, after it had dropped sharply from over $13 a share in May. Shares of NIHD recently spiked right off its 50-day at $6.91 with massive upside volume. That action could be setting up NIHD to break out soon and continue to trend higher.

If you’re in the bull camp on NIHD, then I would look for long-biased trades off weakness if it can manage to hold above its 50-day at $6.91 a share off any pullback. If NIHD can hold that level, then look for it to break out above some near-term overhead resistance levels at $8.39 to $8.76 a share with high volume.

Look for a sustained move or close above those levels with volume that registers near or above its three-month average action of 6.1 million shares. If we get that breakout, then NIHD will setup to re-test or possibly take out its next major overhead resistance levels at $10.70 to $12 a share.

Tenet Healthcare

Another stock to consider with some decent insider buying is Tenet Healthcare (THC), an investor-owned health care services company whose subsidiaries and affiliates own and operate acute care hospitals, ambulatory surgery centers, diagnostic imaging centers and related health care facilities. Insiders are buying this stock into some decent strength, since shares are up around 18% so far in 2012.

Tenet Healthcare has a market cap of $2.54 billion and an enterprise value of $7.21 billion. This stock trades at reasonable valuation, with a forward price-to-earnings of 9.24. Its estimated growth rate for this year is 54.1%, and for next year it’s pegged at 15.8%. This is not a cash-rich company, since the total cash position on its balance sheet is $82 million and its total debt is a whopping $4.75 billion.

A beneficial owner just bought 3 million shares, or around $17.25 million worth of stock, at $5.75 per share.

From a technical perspective, THC is currently trading above both its 50-day and 200-day moving averages, which is bullish. This stock recently triggered a big breakout after it cleared some near-term overhead resistance levels at $5.35 to $5.64 a share with heavy upside volume. Following that breakout, THC went on to hit a recent high of $6.44 a share. The stock has since then cooled off a bit and trended down towards $6 a share.

If you’re bullish on THC, then I would look for long-biased trades once it manages to break out above some near-term overhead resistance levels at $6.44 a share with high volume. Look for a sustained move or close above $6.44 with volume that tracks in close to or above its three-month average action of 7,891,600 shares. If that breakout triggers soon, then look for THC to re-test or possibly take out its next major overhead resistance level at $7.70 a share.

One can look to buy THC off any weakness to anticipate that breakout and simply use a stop that sits around $5.60 to $5.40 a share.

To see more stocks with notable insider buying, including Wausau (WPP), Mercer (MERC) and Ziprealty (ZIPR), 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.