Stock Quotes in this Article: AFSI, REXX, SCCO, TDG, OMED

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.

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

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AmTrust Financial Services

One insurance player that insiders are snapping up a huge amount of stock in here is AmTrust Financial Services (AFSI), which provides property and casualty insurance in the U.S. and internationally. Insiders are buying this stock into major strength, since shares are up sharply so far in 2014 by 38%.

AmTrust Financial Services has a market cap of $3.4 billion and an enterprise value of $3.4 million. This stock trades a cheap valuation, with a forward price-to-earnings of 8.5. Its estimated growth rate for this year is 44.2%, and for next year it's pegged at 7.8%. This is not a cash-rich company, since the total cash position on its balance sheet is $645.43 million and its total debt is $731.89 million.

A director just bought 100,000 shares, or about $4.33 million worth of stock, at $43.33 per share.

From a technical perspective, AFSI is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock recently pulled back to its 50-day moving average near $42.50 and found buying interest. Since that pullback, shares of AFSI have now started to bounce higher and it's quickly moving within range of triggering a big breakout trade above some key near-term overhead resistance levels.

If you're bullish on AFSI, then I would look for long-biased trades as long as this stock is trending above some near-term support at $42.50 and then once it breaks out above some near-term overhead resistance levels at $45.63 to $45.89 a share and then above $46.02 to its 52-week high at $47.10 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 volume of 547,008 shares. If that breakout triggers soon, then AFSI will set up to enter new 52-week-high territory above $47.10, which is bullish technical price action. Some possible upside targets off that breakout are $50 to $55 a share.

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OncoMed Pharmaceuticals

Another development-stage biotechnology player that insiders are loading up on here is OncoMed Pharmaceuticals (OMED), which focuses on discovering and developing monoclonal antibody therapeutics targeting cancer stem cells. Insiders are buying this stock into major weakness, since shares are off sharply over the last six months by 45%.

OncoMed Pharmaceuticals has a market cap of $594 million and an enterprise value of $326 million. This stock trades at a premium valuation, with a price-to-sales of 13.48 and a price-to-book of 6.41. Its estimated growth rate for this year is 30.1%, and for next year it's pegged at 37.8%. This is a cash-rich company, since the total cash position on its balance sheet is $266.35 million and its total debt is zero.

A director just bought 80,203 shares, or about $1.52 million worth of stock, at $18.89 to $18.98 per share.

From a technical perspective, OMED 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 six months, with shares sliding sharply lower from over $38 to its recent low of $16.57 a share. During that downtrend, shares of OMED have been consistently making lower highs and lower lows, which is bearish technical price action. That said, shares of OMED have now started to rebound off that $16.57 low and it's starting to move within range of triggering a near-term breakout trade.

If you're in the bull camp on OMED, then I would look for long-biased trades as long as this stock is trending above some near-term support at $18 and then once it breaks out above some near-term overhead resistance at $20.45 to its 50-day moving average of $21.44 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 169,655 shares. If that breakout develops soon, then OMED will set up to re-test or possibly take out its next major overhead resistance levels at $23.80 to $24.79 a share, or even its 200-day moving average at $26.09 to $28 a share.

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Southern Copper

One basic materials player that insiders are active in here is Southern Copper (SCCO), which is engaged in the mining, exploring, smelting, and refining copper and other minerals in Peru, Mexico, Argentina, Chile, and Ecuador. Insiders are buying this stock into strength, since shares are up notably by 13% so far in 2014.

Southern Copper has a market cap of $27 billion and an enterprise value of $29.7 billion. This stock trades at a reasonable valuation, with a trailing price-to-earnings of 18 and a forward price-to-earnings of 15. Its estimated growth rate for this year is -8.9%, and for next year it's pegged at 20.6%. This is not a cash-rich company, since the total cash position on its balance sheet is $1.63 billion and its total debt is $4.21 billion. This stock currently sports a dividend yield of 1.4%.

The chairman of the board just bought 370,000 shares, or about $11.98 million worth of stock, at $31.36 to $32.87 per share.

From a technical perspective, SCCO is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has just started to bounce higher right off its 50-day moving average of $31.94 a share with decent upside volume flows. That spike is now starting to push shares of SCCO within range of triggering a major breakout trade above some key near-term overhead resistance levels.

If you're bullish on SCCO, then I would look for long-biased trades as long as this stock is trending above its 50-day at $31.94 or above more near-term support at $30.83 and then once it breaks out above some near-term overhead resistance levels at $33.37 to $33.67 a share and then above its 52-week high at $33.90 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 2.07 million shares. If that breakout materializes soon, then SCCO will set up to enter new 52-week-high territory above $33.90, which is bullish technical price action. Some possible upside targets off that breakout are $38 to $40 a share.

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Rex Energy

One basic materials player that insiders are jumping into here is Rex Energy (REXX), which operates as an independent oil and gas exploration and production company in the Appalachian and Illinois basins in the U.S. Insiders are buying this stock into noticeable weakness, since shares are down by 22% so far in 2014.

Rex Energy has a market cap of $797 million and an enterprise value of $1.3 billion. This stock trades at a reasonable valuation, with a trailing price-to-earnings of 85 and a forward price-to-earnings of 19. Its estimated growth rate for this year is 35.6%, and for next year it's pegged at 26.2%. This is not a cash-rich company, since the total cash position on its balance sheet is $5.95 million and its total debt is $567.53 million.

A director just bought 227,650 shares, or about $3.31 worth of stock, at $14.31 to $14.68 per share.

From a technical perspective, REXX is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has been uptrending a bit over the last month, with shares moving higher from just under $13 to its recent high of $15.62 a share. During that move, shares of REXX have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of REXX within range of triggering a big breakout trade above some key near-term overhead resistance levels.

If you're bullish on REXX, 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 $13.73 and then once it breaks out above its 50-day moving average of $15.39 to some more near-term overhead resistance at $15.62 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 928,026 shares. If that breakout kicks off soon, then REXX will set up to re-test or possibly take out its next major overhead resistance levels at $17 to $17.84 a share, or even its 200-day moving average of $18.11 to $19 a share.

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TransDigm Group

One final stock with some large insider buying is TransDigm Group (TDG), which designs, produces, and supplies engineered aerospace components for commercial and military aircraft customers in the U.S. Insiders are buying this stock into strength, since shares have jumped to the upside by 16% so far in 2014.

TransDigm Group has a market cap of $9.9 billion and an enterprise value of $16.6 billion. This stock trades at a premium valuation, with a trailing price-to-earnings of 54 and a forward price-to-earnings of 22. Its estimated growth rate for this year is 9.7%, and for next year it's pegged at 12.3%. This is not a cash-rich company, since the total cash position on its balance sheet is $729.13 million and its total debt is $7.52 billion.

The CEO just bought 10,815 shares, or about $2 million worth of stock, at $185.17 to $185.89 per share.

From a technical perspective, TDG 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 ripping higher from its low of $150.07 to its recent high of $189.37 a share. During that uptrend, shares of TDG have been consistently making higher lows and higher highs, which is bullish technical price action.

If you're bullish on TDG, then look for long-biased trades as long as this stock is trending above some near-term support at $185 a share and then once it breaks out above some near-term overhead resistance at $189.37 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 449,955 shares. If that breakout begins soon, then TDG will set up to make a run at $100 a share, or even north of $100 if that level gets taken out with 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.