Stock Quotes in this Article: HERO, OPK, RSG, MACK, AGIO

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, it's 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 five stocks whose insiders have been doing some big buying per SEC filings.

 

Hercules Offshore

 

One energy player that insiders are active in here is Hercules Offshore (HERO), which provides shallow-water drilling and marine services to the oil and natural gas exploration and production industry worldwide. Insiders are buying this stock into major weakness, since shares are off sharply by 38% so far in 2014.

 

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Hercules Offshore has a market cap of $644 million and an enterprise value of $1.79 billion. This stock trades at a cheap valuation, with a forward price-to-earnings of 7.85. Its estimated growth rate for this year is 59.3%, and for next year it's pegged at 20.9%. This is not a cash-rich company, since the total cash position on its balance sheet is $197.21 million and its total debt is $1.29 billion.

 

The CEO just bought 36,000 shares, or about $144,000 worth of stock, at $4.01 per share.

 

From a technical perspective, HERO is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock recently gapped down sharply from $5 to its new 52-week low of $3.90 a share with heavy downside volume flows. Following that move, shares of HERO have started to rebound off that $3.90 low and off oversold levels since its relative strength index reading hit 30.

 

If you're bullish on HERO, then I would look for long-biased trades as long as this stock is trending above its 52-week low of $3.90 and then once breaks out above Wednesday's intraday high of $4.10 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 4.88 million shares. If that breakout starts soon, then HERO will set up to re-test or possibly take out its next major overhead resistance levels at around $4.30 or at its 50-day moving average of $4.49 a share. Any high-volume move above $4.70 would then give HERO a chance to re-fill its previous gap-down-day zone that started at $5 a share.

 

Merrimack Pharmaceuticals

 

Another stock that insiders are jumping into here is Merrimack Pharmaceuticals (MACK), which is engaged in discovering, developing and preparing to commercialize medicines paired with companion diagnostics for the treatment of cancer primarily in the U.S. Insiders are buying this stock into major strength, since shares have ripped higher by 38% so far in 2014.

 

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Merrimack Pharmaceuticals has a market cap of $765 million and an enterprise value of $713 million. This stock trades at a premium valuation, with a price-to-sales of 16.04. Its estimated growth rate for this year is 12.1, and for next year it's pegged at 17.2%. This is just barely a cash-rich company, since the total cash position on its balance sheet is $124.18 million and its total debt is $113.81 million.

 

A director just bought 36,000 shares, or about $246,000 worth of stock, at $6.84 per share. Another director also just bought 32,390 shares, or about $221,000 worth of stock, at $6.84 per share.

 

From a technical perspective, MACK is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock recently sold off from around $8 a share to right around its 50-day moving average of $6.69 a share. Following that move, shares of MACK have started to rebound and re-fill a previous gap-down-day zone that started near $8. That spike higher into the gap is starting to push shares of MACK within range of triggering a big breakout trade.

 

If you're in the bull camp on MACK, then I would look for long-biased trades as long as this stock is trending above its 50-day at $6.69 and then once it breaks out above some near-term overhead resistance levels at $7.97 to its 52-week high of $8.25 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 2.24 million shares. If that breakout begins soon, then MACK will set up to enter new 52-week-high territory above $8.25, which is bullish technical price action. Some possible upside targets off that move are $9 to $10 a share.

 

Agios Pharmaceuticals

 

Another stock that insiders are moving into here is Agios Pharmaceuticals (AGIO), which focuses on the development and commercialization of therapeutics in the field of cancer metabolism and inborn errors of metabolism in the U.S. Insiders are buying this stock into major strength, since shares are up big so far in 2014 by 79%.

 

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Agios Pharmaceuticals has a market cap of $1.4 billion and an enterprise value of $1.5 billion. This stock trades at a premium valuation, with a price-to-sales of 53.91 and a price-to-book of 11.51. Its estimated growth rate for this year is 48.1%, and for next year it's pegged at 15%. This is a cash-rich company, since the total cash position on its balance sheet is $162.27 million and its total debt is zero.

 

A director just bought 2,300 shares, or about $100,000 worth of stock, at $43.98 per share.

 

From a technical perspective, AGIO is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been selling off after a failed breakout attempt for the last few weeks, with shares moving lower from its high of $50.37 to its intraday low of $42.15 a share. That move is quickly pushing shares of AGIO within range of tagging its 50-day moving average of $40.27 a share.

 

If you're bullish on AGIO, then I would look for long-biased trades as long as this stock is trending above its 50-day at $40.27 and then once it breaks out above some near-term overhead resistance at $45 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 419,691 shares. If that breakout starts soon, then AGIO will set up to re-test or possibly take out its next major overhead resistance level at its all-time high of $50.37 a share. Any high-volume move above that level will then give AGIO a chance to tag $55 to $60 a share.

 

Republic Services

 

One waste management player that insiders are loading up on here is Republic Services (RSG), which provides non-hazardous solid waste collection, transfer and recycling and disposal services for commercial, industrial, municipal and residential customers in the U.S. and Puerto Rico. Insiders are buying this stock into notable strength, since shares are up 12% so far in 2014.

 

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Republic Services has a market cap of $13.3 billion and an enterprise value of $20.2 billion. This stock trades at reasonable valuation, with a trailing price-to-earnings of 22.7 and a forward price-to-earnings of 17.3. Its estimated growth rate for this year is -0.50%, 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 $175.80 million and its total debt is $7.01 billion. This stock currently sports a dividend yield of 2.8%.

 

A beneficial owner just bought 300,000 shares, or about $11.25 million worth of stock, at $37.50 per share. That same beneficial owner also just bought 183,577 shares, or about $6.83 million worth of stock, at $37.24 per share.

 

From a technical perspective, RSG 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 and change, with shares moving higher from its low of $31.18 to its recent high of $37.64 a share. During that uptrend, shares of RSG have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of RSG within range of triggering a near-term breakout trade.

 

If you're bullish on RSG, then I would look for long-biased trades as long as this stock is trending above some near-term support at $36.50 or above its 50-day at $35.52 and then once it breaks out above its 52-week high at $37.64 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 volume of 1.27 million shares. If that breakout materializes soon, then RSG will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that breakout are $40 to $45 a share.

 

Opko Health

 

One final stock with some decent insider buying is Opko Health (OPK), which is engaged in the discovery, development and commercialization of novel and proprietary technologies. Insiders are buying this stock into modest weakness, since shares are down by 7% over the last three months.

 

Opko Health has a market cap of $3.5 billion and an enterprise value of $3.9 billion. This stock trades at a premium valuation, with a price-to-sales of 41.55 and a price-to-book of 4.34. Its estimated growth rate for this year is -18.8%, and for next year it's pegged at 15.8%. This is not a cash-rich company, since the total cash position on its balance sheet is $156.40 million and its total debt is $238.93 million.

 

The CEO just bought 45,000 shares, or about $412,000 worth of stock, at $9.17 per share.

From a technical perspective, OPK is currently trending above its 50-day moving average and just below its 200-day moving average, which is neutral trendwise. This stock recently sold off with heavy downside volume from around $9.50 to just below its 50-day moving average of $8.61 a share. Following that move, shares of OPK have started to bounce higher a bit and begin to move within range of triggering a near-term breakout trade.

 

If you're bullish on OPK, then look for long-biased trades as long as this stock is trending above some key near-term support at $8.44 and then once it breaks out above some near-term overhead resistance at $8.75 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 2.51 million shares. If that breakout kicks off soon, the OPK will set up to re-test or possibly take out its next major overhead resistance levels at its 200-day moving average of $9.17 to around $9.50 a share. Any high-volume move above those levels will then give OPK a chance to tag its next major overhead resistance levels at $9.83 to $10.15, or even $10.25 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 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.