Stock Quotes in this Article: ABT, GD, BGMD, SSH, NLNK

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.

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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.

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NewLink Genetics

One biotech stock that insiders are buying is NewLink Genetics (NLNK), which is focused on discovering, developing and commercializing novel immunotherapeutic products to improve cancer treatment options for patients and physicians. Insiders are buying this stock into modest strength, since shares are up 5% in the last six months.

NewLink Genetics has a market cap of $263 million and an enterprise value of $236 million. This stock trades at a premium valuation, with a price-to-sales of 155.66 and a price-to-book of 11.31. Its estimated growth rate for this year is 61.7%, and for next year it’s pegged at -10.5%. This is a cash-rich company, since the total cash position on its balance sheet is $28.30 million and its total debt is just $1.45 million.

A beneficial owner just bought 880,000 shares, or $10 million worth of stock, at $11.40 per share.

From a technical perspective, NLNK is currently trending above its 50-day moving average and just below its 200-day moving average, which is neutral trendwise. This stock has been trending sideways for the last three months, with shares moving between $10.60 on the downside and $13.13 on the upside. A high-volume move above the upper-end of its recent range will trigger a breakout trade for shares of NLNK.

If you’re bullish on NLNK, then I would look for long-biased trades as long as it’s trending above its 50-day at $11.88, and then once it manages to break out above some near-term overhead resistance levels at $13.13 a share and above its 200-day at $13.19 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 86,573 shares.

If that breakout triggers soon, then NLNK will set up to re-test or possibly take out its next major overhead resistance levels at $13.94 to $14.34 a share. Any move above $14.34 will then put $15.50 to $15.72 into focus for shares of NLNK.

BG Medicine

Another stock in the biotechnology and drugs complex that insiders are active in here is BG Medicine (BGMD), which is focused on the discovery, development and commercialization of novel diagnostic tests based on biomarkers for high-value market opportunities in health care. Insiders are buying this stock into major weakness, since shares are off by 69% in the last six months.

BG Medicine has a market cap of $43 million and an enterprise value of $35 million. This stock trades at a premium valuation, with a price-to-sales of 20.48 and a price-to-book of 15.94. Its estimated growth rate for this year is -36%, and for next year it’s pegged at 12.5%. This is a cash-rich company, since the total cash position on its balance sheet is $17.58 million and its total debt is $9.83 million. After you back out the debt, this company has $7.75 million in cash on its books.

A director and beneficial owner just bought 2 million shares, or $4 million worth of stock, at $2 per share. Another director also just bought 250,000 shares, or $500,000 worth of stock, at $2 per share.

From a technical perspective, BGMD is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has been downtrending badly for the last two months, with shares dropping from its high of $4.48 to its recent low of $2 a share. During that downtrend, shares of BGMD have been mostly making lower highs and lower lows, which is bearish technical price action. That said, the stock has started to rebound off that $2 low and is now moving within range of triggering a near-term breakout trade.

If you’re in the bull camp on BGMD, then I would look for long-biased as long as it’s trending above $2, and then once it manages to break out above some near-term overhead resistance levels at $2.32 to $2.53 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 volume of 725,129 shares. If that breakout triggers soon, then BGMD will set up to re-test or possibly take out its next major overhead resistance levels at $3.15 to its 200-day moving average at $4.02 a share.

General Dynamics

An aerospace and defense stock that insiders are snapping up here is General Dynamics (GD), which offers a broad portfolio of products and services in business aviation; combat vehicles, weapons systems and munitions; military and commercial shipbuilding; and communications and information technology. Insiders are buying this stock into modest strength, since shares are up 4.6% in the last six months.

General Dynamics has a market cap of $23.35 billion and an enterprise value of $23.65 billion. This stock trades at a cheap valuation, with a forward price-to-earnings of 9.16. Its estimated growth rate for this year is 5.4%, and for next year it’s pegged at 5.6%. This is not a cash-rich company, since the total cash position on its balance sheet is $3.30 billion and its total debt is $3.91 billion.

A director just bought 5,000 shares, or about $332,000 worth of stock, at $66.47 per share.

From a technical perspective, GD is currently trending above its 200-day moving average and below its 50-day moving average, which is neutral trendwise. This stock recently sold off hard, with shares dropping from its recent high of $72.01 to its low of $64.47 a share. During that selloff, shares of GD were consistently making lower highs and lower lows, which is bearish technical price action. That said, shares of GD have started to rebound off that $64.47 low and its moving back above its 200-day moving average at $65.53 a share.

Traders who are bullish on GD should now look for long-biased trades as long as it’s trending above its 200-day at $65.53, and then once it manages to break out above some near-term overhead resistance at $67 a share with high volume. Look for a sustained move or close above $67 with volume that hits near or above its three-month average action of 2.2 million shares. If that breakout hits soon, then GD will set up to re-test or possibly take out its 50-day moving average of $68.58 a share. Any high-volume move above its 50-day will put $70 to $71 into range for shares of GD.

Abbott Laboratories

Another biotech stock that insiders are jumping into here is Abbott Laboratories (ABT), which is engaged in the discovery, development, manufacture and sale of a broad and a line of health care products. Insiders are buying this stock into modest strength, since shares are up 2.8% in the last months.

Abbott Laboratories has a market cap of $53.82 billion and an enterprise value $58.26 billion. This stock trades at a reasonable valuation, with a trailing price-to-earnings of 9.15 and a forward price-to-earnings of 15.07. Its estimated growth rate for this year is -60.2%, and for next year it’s pegged at 11.9%. This is not a cash-rich company, since the total cash position on its balance sheet is $11.50 billion and its total debt is $16.28 billion.

A director just bought 10,000 shares, or about $338,000 worth of stock, at $33.83 to $33.86 per share.

From a technical perspective, ABT 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 and change, with shares moving higher from its low of $29.84 to its recent high of $34.24 a share. During that uptrend, shares of ABT have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of ABT within range of triggering a major breakout trade.

Traders should now look for long-biased trades in ABT as long as it’s trending above some near-term support levels at $32.55 or above its 50-day at $32.11, and then once it manages to break out above some key overhead resistance levels at $33.88 to $34.53 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 14.9 million shares.

If that breakout triggers soon, then ABT will set up to enter new 52-week high territory, which is bullish technical price action. Some possible upside targets off that breakout are $37 to $40 a share.

Sunshine Heart

One more stock with some decent insider buying is medical device player Sunshine Heart (SSH), which is focused on developing, manufacturing and commercializing its C-Pulse Heart Assist System for treatment of Class III and ambulatory Class IV heart failure. Insiders are buying this stock into strength, since shares are up 15.9% so far in 2013.

Sunshine Heart has a market cap of $65 million and an enterprise value of $45 million. This stock trades at a reasonable valuation, with a price-to-book of 3.78. Its estimated growth rate for next year is pegged at -6.7%. This is a cash-rich company, since the total cash position on its balance sheet is $17.45 million and its total debt is zero.

A beneficial owner just bought 41,999 shares, or about $257,000 worth of stock, at $6.13 to $6.19 per share.

From a technical perspective, SSH 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 few weeks, with shares soaring from its low of $5.21 to its recent high of $7.20 a share. During that uptrend, shares of SSH have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of SSH within range of triggering a near-term breakout trade.

If you’re bullish on SSH, then I would look for long-biased as long as it’s trending above its 50-day $6.35, and then once it breaks out above some near-term overhead resistance levels at $7.50 to $7.65 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 66,342 shares. If that breakout triggers soon, then SSH will set up to re-test or possibly take out its next major overhead resistance levels at $8.50 to $9.80 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 technical analysis for small- and large-cap stocks, options, futures, commodities and currencies. Roberto studied international business at the Milwaukee School of Engineering, and he spent a year overseas studying business in Lubeck, Germany. His work has appeared on financial outlets including

CNBC.com and Forbes.com. You can follow Pedone on Twitter at www.twitter.com/zerosum24 or @zerosum24.