Stock Quotes in this Article: AGCO, GLUU, ODP, REED, VSAT

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.

Reed’s

One stock that insiders are jumping into here is Reed’s (REED), which develops, manufactures, markets and sells natural non-alcoholic and “new age” beverages, candies and ice creams. Insiders are buying this stock into some extreme strength, since shares are up over 650% so far in 2012.

Reed’s has a market cap of $94 million and an enterprise value of $98 million. This stock trades at a premium valuation, with a forward price-to-earnings of 64.46. Its estimated growth rate for this year is 177.8%, and for next year it’s pegged at 85.7%. This is not a cash-rich company, since the total cash position on its balance sheet is $1.39 million and its total debt is $6.1 million.

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The CFO just bought 62,338 shares, or about $480,000 worth of stock, at $7.70 per share. The COO also just bought 41,299 shares, or about $318,000 worth of stock, at $7.70 per share.

From a technical perspective, REED is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending very strong for the past six months, with shares soaring from a low of $1.81 to its recent high of $8.49 a share. During that uptrend, shares of REED have been consistently making higher lows and higher highs, which is bullish technical price action.

If you’re bullish on REED, then I would look for long-biased trades off on weakness that takes the stock back towards its 50-day moving average of $6.36 a share. That 50-dy has held up as a key support level for the past six months. Any pullback to that level should be viewed as an excellent buying opportunity.

ViaSat

Another stock that insiders are loading up on here is ViaSat (VSAT), which is engaged in providing fixed and mobile broadband services, satellite and wireless networks and secure networking systems, products and services. Insiders are buying this stock into some modest weakness, since shares are down by 13% so far in 2012.

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ViaSat has a market cap of $1.74 billion and an enterprise value of $2.14 billion. This stock trades at a fair valuation, with a forward price-to-earnings of 28.16. Its estimated growth rate for this year is -116.4%, and for next year it’s pegged at 1,283.3%. This is not a cash-rich company, since the total cash position on its balance sheet is $129.89 million and its total debt is $549.62 million.

A beneficial owner just bought 59,796 shares, or about $2.37 million worth of stock, at $39.74 per share. This same beneficial owner also just bought 80,755 shares, or about $3.14 million worth of stock, at $38.98 per share.

From a technical perspective, VSAT is currently trading below its 200-day moving average and above its 50-day moving average, which is neutral trendwise. This stock has recently trended back above its 50-day at $38.40 with decent volume. That move has now pushed VSAT within range of triggering a near-term breakout trade.

If you’re in the bull camp on VSAT, then I would look for long-biased trades as long as it’s trending above its 50-day, and then once it manages to break out above some near-term overhead resistance levels at $40.49 to $42.35 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 277,103 shares. If that breakout triggers soon, then look for VSAT to re-test or possibly take out its next major overhead resistance levels at $43 to $47 a share.

As of the most recent quarter, ViaSat was one of Seth Klarman's Baupost Group.

Glu Mobile

Another stock that insiders are very active in here is Glu Mobile (GLUU), which designs, markets and sells mobile games. Insiders are buying this stock into some extreme weakness, since shares are down by 30% in the last three months.

Glu Mobile has a market cap of $239 million and an enterprise value of $214 million. This stock trades at a reasonable valuation, with a forward price-to-earnings of 21.59. Its estimated growth rate for this year is 28.6%, and for next year it’s pegged at 440%. This is a cash-rich company, since the total cash position on its balance sheet is $24.53 million and its total debt is zero.

A director just bought 3.2 million shares, or about $9.90 million worth of stock, at $2.91 to $3 per share.

From a technical perspective, GLUU is currently trading well below both its 50-day and 200-day moving averages, which is bearish. This stock recently sold off hard from $5.40 to a low of $2.72 a share with monster volume. During that plunge, shares of GLUU were consistently making lower highs and lower lows, which is bearish technical price action. That said, the stock has started to rebound off that low with strong upside volume.

If you‘re bullish on GLUU, then I would look for long-biased trades once it manages to take out some near-term overhead resistance at $3.75 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 2.7 million shares. If that breakout triggers soon, then I would look to add to any long positions once GLUU pushed back above its 50-day at $4.66 with strong volume.

Office Depot

Another stock that insiders are finding attractive here is global supplier of office products and services Office Depot (ODP). Insiders are buying this stock into some notable weakness, since shares are down by 29% in the last six months.

Office Depot has a market cap of $665 million and an enterprise value of $922 million. This stock trades at a reasonable valuation, with a trailing price-to-earnings of 8.18 and a forward price-to-earnings of 29.25. Its estimated growth rate for this year is 33.3%, and for next year it’s pegged at 500%. This is not a cash-rich company, since the total cash position on its balance sheet is $422.68 million and its total debt is $674.55 million.

A beneficial owner just bought 4.1 million shares, or about $9.37 million worth of stock, at $2.25 to $2.36 per share.

From a technical perspective, ODP is currently trading above its 50-day moving average and below its 200-day moving average, which is neutral trendwise. This stock has recently sold off from its high of $2.85 to a low of $2.24 a share. During that selloff, shares of ODP have been making lower highs and lower lows, which is bearish technical price action. That said, shares of ODP have now found some buying interest at around $2.26 to $2.24 a share.

If you’re in the bull camp on ODP, then I would only look for long-biased trades if it can manage to break out above some key overhead resistance levels at $2.44 to $2.50 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 5.7 million shares. If we get that breakout soon, then ODP will setup to re-test or possibly take out its next major overhead resistance levels at $2.71 to $2.85 a share. Traders should use $2.24 to $2.06 as near-term support levels to key off of.

Agco

One more stock to consider with some monster insider buying is construction and agriculture machinery maker Agco (AGCO), a manufacturer and distributor of agricultural equipment and related replacement parts worldwide. Insiders are buying this stock into some decent strength, since shares are up around 13% so far in 2012.

Agco has a market cap of $4.75 billion and an enterprise value of $5.71 billion. This stock trades at a cheap valuation, with a trailing price-to-earnings of 6.91 and a forward price-to-earnings of 8.46. Its estimated growth rate for this year is 27.5%, and for next year it’s pegged at 1.2%. This is not a cash-rich company, since the total cash position on its balance sheet is $393.40 million and its total debt is $1.53 billion.

A director just bought 238,974 shares, or around $10.95 million worth of stock, at $45.86 to $41.74 share.

From a technical perspective, AGCO 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 five months, with shares soaring from $38.09 to $48.98 a share. During that uptrend, shares of AGCO have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed AGCO into breakout territory above some near-term overhead resistance at $48.72 a share.

If you’re bullish on AGCO, then I would look for long-biased trades as long as it’s trending above $47 to $48.70 with strong upside volume flows. I would consider any upside volume day that registers near or above its three-month average action of 1.1 million shares as bullish. IF AGCO can maintain that trend, then this stock will have a great chance of re-testing or possibly taking out its next major overhead resistance levels at $51.25 to $52.37 a share. Any high-volume move above those levels will put $54 into focus.

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.