Stock Quotes in this Article: AKAM, GHDX, GUID, KMX, SREV

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.

>>4 Loser Stocks Poised for a Comeback in 2013

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.

>>Hedge Funds Hate These 5 Stocks -- but Should You?

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.

>>5 Hated Stocks Set to Soar on Earnings

ServiceSource International

One stock that insiders are active in here is ServiceSource International (SREV), which helps hardware, software, health care and life sciences companies derive from their customers more revenue from maintenance, support and subscription agreements. Insiders are buying this stock into strength, since shares are up 20% so far in 2013.

ServiceSource International has a market cap of $524 million and an enterprise value of $410 million. This stock trades at a premium valuation, with a forward price-to-earnings of 53.77. Its estimated growth rate for this year is -20%, and for next year it’s pegged at 62.5%. This is a cash-rich company, since the total cash position on its balance sheet is $109.44 million and its total debt is just $326,000.

The CEO just bought 43,000 shares, or about $296,000 worth of stock, at $6.90 per share.

From a technical perspective, SREV is currently trending above its 50-day moving average and below its 200-day moving average, which is neutral trendwise. This stock has been uptrending strong for the last three months, with shares soaring higher from its low of $4.01 to its recent high of $7.31 a share. During that uptrend, shares of SREV have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of SREV within range of triggering a near-term breakout trade.

If you’re bullish on SREV, then I would look for long-biased trades as long as it’s trending above its 50-day at $6.10, and then once it manages to break out above some near-term overhead resistance at $7.31 a share with high volume. Look for a sustained move or close above $7.31 a share with volume that hits near or above its three-month average action of 1,046,010 shares. If that breakout triggers soon, then SREV will set up to re-fill some of its previous gap down zone from last November that started around $9 a share.

Genomic Health

Another stock that insiders are loading up on here is Genomic Health (GHDX), which is engaged in the development and commercialization of genomic-based clinical laboratory services that analyze the underlying biology of cancer, allowing physicians and patients to make individualized treatment decisions. Insiders are buying this stock into weakness, since shares are off by 16.5% in the last six months.

Genomic Health has a market cap of $876 million and an enterprise value of $779 million. This stock trades at a premium valuation, with a trailing price-to-earnings of 110.19 and a forward price-to-earnings of 98.79. Its estimated growth rate for this year is -84.6%, and for next year it’s pegged at 625%. This is a cash-rich company, since the total cash position on its balance sheet is $99.07 million and its total debt is zero.

A director and beneficial owner just bought 116,360 shares, or about $3.27 million worth of stock, at $27.96 to $28.23 per share.

From a technical perspective, GHDX is currently trending above its 50-day moving average and below its 200-day moving average, which is neutral trendwise. This stock has been trading inside of a consolidation pattern for the last month, with shares moving between $27.56 on the downside and $30.18 on the upside. A high-volume move above the upper-end of that recent sideways chart pattern will trigger a near-term breakout trade for shares of GHDX.

If you’re in the bull camp on GHDX, then I would look for long-biased as long as it’s trending above $27.56 or $26.78, and then once it manages to break out above some near-term overhead resistance levels at $29.54 to $30.18 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 222,634 shares. If that breakout triggers soon, then GHDX will set up to re-fill some of its previous gap down zone from last November that started near $32 a share. Any high-volume move above $33 will then put $35 to $36 into range for shares of GHDX.

Akamai Technologies

A software stock that insiders are snapping up a large amount of stock in here is Akamai Technologies (AKAM), a provider of services for accelerating and improving the delivery of content and applications over the Internet, from live and on-demand streaming videos to conventional content on Web pages to tools that help people transact business. Insiders are buying this stock into notable weakness, since shares are off by 9.6% so far in 2013.

Akamai Technologies has a market cap of $6.56 billion and an enterprise value of $6.10 billion. This stock trades at a reasonable valuation, with a trailing price-to-earnings of 32.90 and a forward price-to-earnings of 16.02. Its estimated growth rate for this year is 12.7%, and for next year it’s pegged at 12.7%. This is a cash-rich company, since the total cash position on its balance sheet is $437.58 million and its total debt is zero.

The CEO just bought 50,000 shares, or about $1.76 million worth of stock, at $35.31 per share.

From a technical perspective, AKAM is currently trending above its 200-day moving average and well below its 50-day moving average, which is neutral trendwise. This stock recently gapped down after it reported earnings from $42 to its recent low of $33.55 a share with heavy downside volume. Following that move, shares of AKAM have started to rebound sharply and move into that gap down zone with decent upside volume.

Traders who’re bullish on AKAM should now look for long-biased trades as long as it’s trending above its 200-day at $35.75, and then once it manages to break out above yesterday’s high at $36.91 a share with high volume. Look for a sustained move or close above $36.91 a share with volume that hits near or above its three-month average action of 3,232,690 shares. At last check, AKAM has started to trigger that move since its intraday high is $37.10. If shares of AKAM can sustain this trend, then a possible upside target is its 50-day moving average of $39.68 a share.

CarMax

One used vehicle retailer that insiders are jumping into here is CarMax (KMX), which is a wholesaler of used cars and also sells new cars under franchise agreements with four new car manufacturers (Chrysler, General Motors, Nissan and Toyota). Insiders are buying this stock into big time strength, since shares are up 36% in the last six months.

CarMax has a market cap of $8.97 billion and an enterprise value $14.33 billion. This stock trades at a fair valuation, with a trailing price-to-earnings of 21.61 and a forward price-to-earnings of 19.09. Its estimated growth rate for this year is 4.5%, and for next year it’s pegged at 10.2%. This is not a cash-rich company, since the total cash position on its balance sheet is $445.13 million and its total debt is a whopping $5.74 billion.

A director just bought 30,000 shares, or about $1.18 million worth of stock, at $39.43 per share.

From a technical perspective, KMX 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 four months, with shares soaring higher from its low of $28.04 to its recent high of $40.22 a share. During that uptrend, shares of KMX have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of KMX within range of triggering a near-term breakout trade.

Traders should now look for long-biased trades in KMX as long as it’s trending above some near-term support at $38.55 or above its 50-day at $37.68, and then once it manages to break out above some near-term overhead resistance levels at $40 to $40.22 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 1.85 million shares. If that breakout triggers soon, then KMX will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that breakout are $45 to $50 a share.

Guidance Software

One more stock name consider with some decent insider buying is software player Guidance Software (GUID), a global provider of digital investigative solutions. Its EnCase platform provides an investigative infrastructure that enables our customers to search, collect and analyze electronically stored information. Insiders are buying this stock into noticeable weakness, since shares are down 16.3% so far in 2013.

Guidance Software has a market cap of $248 million and an enterprise value of $212 million. This stock trades at a reasonable valuation, with a forward price-to-earnings of 17.64. Its estimated growth rate for this year is 25%, and for next year it’s pegged at 12%. This is a cash-rich company, since the total cash position on its balance sheet is $32.61 million and its total debt is just $574,000.

A beneficial owner just bought 130,049 shares, or about $1.26 million worth of stock, at $9.45 to $9.77 per share.

From a technical perspective, GUID is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock recently gapped down from around $12 a share to its recent low of $8.99 a share with heavy downside volume. Following that move, shares of GUID have started to rebound a bit towards its current price at $9.88 a share. That rebound is starting to push shares of GUID within range of triggering a near-term breakout trade.

If you’re bullish on GUID, then I would look for long-biased as long as it’s trending above some key support near $9.50, and then once it breaks out above its gap down day high at $10.50 a share and above its 200-day at $10.53 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 action of 88,316 shares. If that breakout triggers soon, then GUID will set up to re-fill some of its previous gap down zone that started near $12 a share. Any high-volume move above $12 will then put $12.75 to $13 into range for shares of GUID.

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.


RELATED LINKS:







Follow Stockpickr on Twitter and become a fan on Facebook.

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.