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5 Stocks With Big Insider Buying - 12413 views
NAV DLTR EQY HLX FSC SFD TGI TIE
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.
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 they only 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, it could end up going nowhere.
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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 that insiders have been doing some big buying in per SEC filings.
One stock with some huge insider buying is Navistar International (NAV), which through its subsidiaries manufactures and sells commercial and military trucks, buses, diesel engines, recreational vehicles and chassis, as well as provides service parts for trucks and trailers. This stock is down 6% so far in 2011, so insiders might be finding some value here during the recent market pullback.
This company has a current market cap of $3.9 billion and an enterprise value of $7.7 billion. The stock trades at a reasonable trailing price-to-earnings of 17 and a very cheap forward price-to-earnings of 7. This isn’t a cash-rich company; its balance sheet has a total debt of $4.91 billion and total cash of only $1.08 billion.
A director just bought 56,000 shares, or about $3 million worth of stock, at $53.97 share. This is the second time a director has stepped up and bought Navistar stock during the month of June.
From a technical standpoint, this stock has been hit tremendously hard during the past two months, with shares falling from a high of $71.50 to its current price of around $54.50 a share. That slide in the stock took shares below both the 50-day and 200-day moving averages. The stock does have some previous support at around $50 a share, and just recently it bottomed at $52 a share.
If you’re looking to buy this stock right now, I would use that $52 to $50 area as my stop in case this one wants to go even lower. If it holds those levels, then it might be a good idea to follow the insiders. That said, if it breaks those levels then it could easily head towards the next significant past support price at $46 a share.
It’s worth noting that the short interest in this stock has been rising recently as the bears succeeded in knocking this name down sharply. The short interest as a percentage of the float for NAV stands at 6.6%. The bears have increased their bets from the last reporting period by 14.5% as of May 31.
Navistar, one of the top holdings of David Tepper's Appaloosa Management, was one of Barrington's Best Stock Picks for 2011.
Dollar Tree (DLTR), an operator of discount variety stores offering merchandise at the fixed price of $1, is considered a great stock to own during slow or tough economic times. This stock is off to a decent start in 2011, with shares up over 18%.
Dollar Tree has a market cap of $7.98 billion and an enterprise value of $7.82 billion. The stock currently trades at a trailing price-to-earnings of 18 and a forward price-to-earnings of 14. This company has a decent amount of cash on its balance sheet, with over $510.30 million of cash and $266.50 million in total debt. That leaves it with a net cash position of $243.80 million.
A director just bought 5,000 shares, or $325,900 worth of stock, at $65.18 per share. It’s also worth mentioning that two other DLTR directors have sold over $1 million worth of stock during the month of June.
From a technical standpoint, this stock just recently broke out above some past overhead resistance at around $63.75 to $64.50 a share. As long as this stock can hold above those breakout prices, then one could buy this name on any pullback with a tight stop in place in case the breakout fails. If the breakout fails and you still like this stock, then look to buy it closer to some big previous support at around $62 to $61 a share. If the stock starts basing around those levels, then it could mean it’s a popular price point where large traders like to buy the stock.
Keep in mind that this stock has been displaying relative strength during the recent market slide. Shares of DLTR just hit a brand new 52-week high of $66.51 a share today. That’s impressive strength for any stock in a weak market, and it shows that traders flock to this defensive name in uncertain environments.
Another stock in which insiders are loading up big on their own shares is Equity One (EQY), a real estate investment trust that owns, manages, acquires, develops and redevelops neighborhood and community shopping centers. This stock has done next to nothing all year, with shares off by less than 1%.
This company has a market cap of $1.97 billion and an enterprise value of $3.4 billion. The stock currently trades at a trailing price-to-earnings of 22 and a forward price-to-earnings of 15.7. Equity One isn’t a cash-rich company, with over $1.47 billion in debt on its balance sheet and just $11.21 million in cash.
The chairman of the board just bought 289,232 shares, or $5.2 million worth of stock at $17.83 to $18.00 per share. This company is due to report earnings on Aug. 4, so I consider this buying a sign of confidence ahead of the quarter.
From a technical standpoint, this stock fell sharply from its recent high of $19.84 to its recent low of $17.40 a share. The stock is now trading below its 50-day moving average and just above its 200-day moving average of $17.88. What I like about this stock here is that on Friday, it bounced off the 200-day with strong volume. Volume registered 1.5 million vs. the three-month average volume of 610,000 shares. If the stock can manage to hold above the 200-day now, then we could be seeing a short-term bottom.
One could be a buyer here and simply stop out below $17.40 a share in case the downtrend wants to resume. I would add to the position once it took out $18.55 and then add again once it trades above the 50-day moving average.
It’s worth nothing that this is a heavily shorted stock. The current short interest as a percentage of the float for EQY stands at 10.8%. The bears have also been increasing their bets from the last reporting period by around 11.8%, or by 642,007 shares. The bears have cleaned up on this stock of late, but if the volume today is any indication, that could be about to change.
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Helix Energy Solutions Group
One energy company that insiders are paying up to own shares of is Helix Energy Solutions Group (HLX), an international offshore energy company that provides reservoir development solutions and other contracting services to the energy market, as well as to its own oil and gas properties, Insiders don’t seem to care that HLX is already up over 32% in 2011 because they have been snapping up shares recently.
Helix Energy Solutions Group has a market cap of $1.7 billion and an enterprise value of $2.66 billion. This stocks trades at a forward price-to-earnings of 13.4. This company isn’t cash-rich, with $440.53 million on cash on its balance sheet and over $1.36 billion in total debt.
Helix’s CEO and president just bought 67,000 shares or $998,491 worth of stock between $14.78 and $15 per share. The last time this CEO bought some stock was back in August of 2010 when close to $1 million was purchased at $9.47 to $9.68 a share.
From a technical standpoint, this stock has started to make lower highs since it topped out back in May at $19.20 a share. I wouldn’t touch this stock from the long side as long as that chart pattern remains because it shows that traders are selling into every rally and accepting even lower prices. I would rather look to buy it closer to the 200-day moving average of $14.03 a share as long as it finds some buying support.
Another way to play this is to only buy it once it takes out $17.62 a share which would break the chart pattern of lower highs. You could then add aggressively once it moves above $19.20 a share to that position.
It’s worth noting that Helix has a reasonable short position. The current short interest as a percentage of the float for HLX stands at 6.3%. Considering the technical picture of this stock right now, the bears are in control and I would wait for lower prices before following the insiders.
One big bullish bet on Helix comes from Ronald Muhlenkamp's Muhlenkamp Fund, which had a 879,000 share position in the stock as of the most recent reporting period.
Fifth Street Finance
One more stock that has seen some notable insider buying recently is Fifth Street Finance (FSC), a finance firm that lends to and invests in small and mid-sized companies in connection with investments by private equity sponsors. This stock hasn’t done much in 2011, with shares down by around 3.7%.
This company has a market cap of $772.67 million and an enterprise value of $1.01 billion. The stock trades at a trailing price-to-earnings of 17 and a forward price-to-earnings of 9.2. This isn’t a cash-rich company, with $38.76 million of cash on its balance sheet and $272.30 million of total debt. That said, Fifth Street, one of the highest-yielding financial services stocks, pays out $1.28 a share in dividends, which equates to 10.9% yield.
Fifth Street recently completed a public offering of common stock, which raised $65.1 million in gross proceeds. The company closed its public offering of 5.6 million shares of common stock at a price of $11.72 per share.
The CEO just bought 30,000 shares, or $347,500 worth of stock, at $11.58 per share. Earlier in June, the CEO also bought 10,000 shares, or $116,740 worth of stock, at $11.67 per share. This same CEO also made a number of purchases in May that totaled over $600,000 worth of stock.
From a technical standpoint, this stock has sold off sharply during the past few months from its high of $13.56 a share to its recent low of $11.42 a share. During that selloff, the stock fell below both its 50-day and 200-day moving averages. That said, the stock could be finding some buying support here at around $11.42 a share. It’s also worth noting that the last time this stock hit $11.36 in early 2011, it ran up to $13.50.
One could be a buyer here on any weakness and simply stop out below $11.36 a share. If this stock falls below $11.36, then it could easily fall down to $10.50 or even $9 a share pretty quickly
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.
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.