Stock Quotes in this Article: ESL, NUAN, ODP, VRX, HZNP

DELAFIELD, Wis. (Stockpickr) -- Corporate insiders sell their own companies' stock for a number of reasons.

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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.

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.

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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 five stocks whose insiders have been doing some big buying per SEC filings.

Valeant Pharmaceuticals

One specialty pharmaceutical player that insiders are loading up on here is Valeant Pharmaceuticals (VRX), which develops, manufactures and markets a broad range of pharmaceutical products primarily in the areas of neurology, dermatology and branded generics. Insiders are buying this stock into massive strength, since shares are up sharply in 2013 by 86%.

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Valeant Pharmaceuticals has a market cap of $37 billion and an enterprise value of $53 billion. This stock trades at a fair valuation, with a price-to-sales of 7.78 and a price-to-book of 7.35. This is not a cash-rich company, since the total cash position on its balance sheet is $596.35 million and its total debt is a whopping $17.40 billion.

The CEO just bought 184,247 shares, or about $14.99 million worth of stock, at $81.41 per share.

From a technical perspective, VRX is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock is starting to bounce higher right above its 50-day moving average of $108.87 a share. That bounce is quickly pushing shares of VRX within range of triggering a near-term breakout trade.

If you're bullish on VRX, then I would look for long-biased trades as long as this stock is trending above its 50-day at $108.87 or above more near-term support at $105.17 and then once breaks out above some near-term overhead resistance levels at $112.40 to $112.47 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 1.13 million shares. If that breakout hits soon, then VRX will set up to re-test or possibly take out its next major overhead resistance levels at $115 to its 52-week high at $115.40 a share. Any high-volume move above $115.40 will then give VRX a chance to tag of trend north of $120 a share.

Office Depot

Another name that insiders are very active in here is Office Depot (ODP), which is a global supplier of office products and services under the Office Depot brand and other proprietary brand names. Insiders are buying this stock into notable strength, since shares have risen 59% so far in 2013.

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Office Depot has a market cap of $1.5 billion and an enterprise value of $1.2 billion. This stock trades at a fair valuation, with a trailing price-to-earnings of 43.78 and a forward price-to-earnings of 20.04. Its estimated growth rate for this year is -33.3%, and for next year it's pegged at 1,200%. This is a cash-rich company, since the total cash position on its balance sheet is $724.74 million and its total debt is $495.17 million.

A director just bought 1,350,000 shares, or about $7.04 million worth of stock, at $5.21 per share.

From a technical perspective, ODP is currently trending above its 200-day moving average and just below its 50-day moving average, which is neutral trendwise. This stock has been trending sideways for the last month and change, with shares moving between $4.83 on the downside and $5.85 on the upside. Traders should now look for any high-volume move above the upper-end of its recent range since that could trigger a big breakout trade for shares of ODP.

If you're in the bull camp on ODP, then I would look for long-biased trades as long as this stock is trending above some near-term support at $5.07 or above more support at $4.83 and then once it breaks out above some near-term overhead resistance levels at $5.65 to $5.85 a share, and then above its 52-week high at $6.10 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 11.07 million shares. If that breakout triggers soon, then ODP will set up to enter new 52-week-high territory above $6.10, which is bullish technical price action. Some possible upside targets off that move are $7 to $8 a share.

Horizon Pharma

One bio therapeutic drugs player that insiders are snapping up a large amount of stock in here is Horizon Pharma (HZNP) is a specialty pharmaceutical company that, through its subsidiaries, develops and commercializes medicines for the treatment of arthritis, pain and inflammatory diseases. Insiders are buying this stock into significant strength, since shares are up huge so far in 2013 by 192%.

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Horizon Pharma has a market cap of $448 million and an enterprise value of $434 million. This stock trades at a premium valuation, with a forward price-to-earnings of 84.25. Its estimated growth rate for this year is 62.4%, and for next year it's pegged at 109.4%. This is just barely a cash-rich company, since the total cash position on its balance sheet is $58.65 million and its total debt is $45.58 million.

A director just bought 668,673 shares, or about $4.34 million worth of stock, at $6.50 per share.

From a technical perspective, HZNP 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 three months and change, with shares moving higher from its low of $2.11 to its recent high of $7.39 a share. During that uptrend, shares of HZNP have been making mostly higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of HZNP within range of triggering a big breakout trade.

If you're bullish on HZNP, then I would look for long-biased trades as long as this stock is trending above some key near-term support levels at $6.64 or at $6, then once it breaks out above some near-term overhead resistance levels at $6.84 to $7.15 a share and then above its 52-week high at $7.39 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 1.27 million shares. If that breakout hits soon, then HZNP will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that move are its next major overhead resistance levels at $8.72 to $9. Any high-volume move above $9 will then give HZNP a chance to tag or trend north of $10 a share.

Nuance Communications

One technology player that insiders are jumping into large here is Nuance Communications (NUAN), which offers voice and language solutions for healthcare, mobile, consumer, enterprise customer service, and imaging markets. Insiders are buying this stock into significant weakness, since shares are down by 33%.

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Nuance Communications has a market cap of $4.6 billion and an enterprise value of $7.4 billion. This stock trades at a reasonable valuation, with a trailing price-to-earnings of 31.40 and a forward price-to-earnings of 10.29. Its estimated growth rate for this year is -18.8%, and for next year it's pegged at 12%. This is not a cash-rich company, since the total cash position on its balance sheet is $1.01 billion and its total debt is $2.34 billion.

A beneficial owner just bought 423,400 shares, or about $5.97 million worth of stock, at $14.12 to $14.20 per share.

From a technical perspective, NUAN is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has been uptrending since gapping down sharply few weeks ago, with shares moving higher from its low of $13 to its intraday high of $14.93 a share. During that uptrend, shares of NUAN have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of NUAN within range of triggering a major breakout trade.

If you're bullish on NUAN, then I would look for long-biased trades as long as this stock is trending above some key near-term support levels at $14 or at $13.50, and then once it takes out its gap down day high of $14.91 a share high volume. Look for a sustained move or close above that level with volume that hits near or above its three-month average volume of 6.82 million shares. If that breakout hits soon, then NUAN will set up to re-fill some of its previous gap down zone that started near $16.50 a share. Any high-volume move above $16.50 will then give NUAN a chance to tag $18 to its 200-day moving average at $18.44 a share.

Esterline Technologies

One final name with some big insider buying is Esterline Technologies (ESL), which designs, manufactures and markets highly engineered products for the aerospace and defense sectors. Insiders are buying this stock into big time strength, since shares are up sharply by 51% so far in 2013.

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Esterline Technologies has a market cap of $3 billion and an enterprise value of $3.2 billion. This stock trades at a reasonable valuation, with a trailing price-to-earnings of 18.84 and a forward price-to-earnings of 15.14. Its estimated growth rate for this year is -0.40%, and for next year it's pegged at 12.5%. This is not a cash-rich company, since the total cash position on its balance sheet is $199.25 million and its total debt is $754.49 million.

A director just bought 103,528 shares, or about $9.50 million worth of stock, at $91.55 to $92.51 per share.

From a technical perspective, ESL is currently trending well 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 soaring higher from its low of $78.17 to its intraday high of $96.81 a share.

During that uptrend, shares of ESL have been consistently making higher lows and higher highs, which is bullish technical price action. That said, shares of ESL have now started to enter overbought territory, since its current relative strength index reading is 79.91. Overbought can always get more overbought, but it's also an area that can be dangerous to enter a stock from the long side.

If you're bullish on ESL, then I would look to get long this strong trending stock after it works off some of its current overbought condition. Look for a sharp pullback in shares of ESL that bring the stock down towards some key near-term support levels around the $87.50 area, or near its 50-day moving average of $83.78 a share. If ESL doesn't pullback significantly, then traders can look to go long this stock once it clears and closes above its new 52-week high at $96.81 a share with strong volume.

To see more stocks with notable insider buying, check out the Stocks With Big Insider Buying portfolio on Stockpickr.

-- Written by Roberto Pedone in Delafield, Wis.


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At the time of publication, author had no positions in stocks mentioned.

Roberto Pedone, based out of Delafield, Wis., 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.