Stock Quotes in this Article: COP, DD, GNRC, GRPN, JIVE

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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Jive Software

One technology player that insiders are active in here is Jive Software (NS), which provides a social business software platform to businesses, government agencies, and other enterprises. Insiders are buying this stock into massive weakness, since shares are down sharply by 43% so far in 2014.

 

Jive Software has a market cap of $446 million and an enterprise value of $365 million. This stock trades at a fair valuation, with a price-to-sales of 2.68 and a price-to-book of 5.67. Its estimated growth rate for this year is 45.5%, and for next year it's pegged at 30%. This is a cash-rich company, since the total cash position on its balance sheet is $98.18 million and its total debt is $6.60 million.

 

A director just bought 260,819 shares, or about $1.71 million worth of stock, at $6.53 to $6.60 per share.

 

From a technical perspective, JIVE is currently trending just above its 50-day moving average and below its 200-day moving average, which is neutral trendwise. This stock recently pulled back off its short-term high of $7.14 a share with heavy downside volume flows. That drop has now pushed the stock to right above its 50-day moving average at $6.10 a share.

If you're bullish on JIVE, then I would look for long-biased trades as long as this stock is trending above its 50-day at $6.10 a share and then once it breaks out above some key near-term overhead resistance levels at $7.14 a share to its 200-day moving average of $7.43 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 557,678 shares. If that breakout triggers soon, then JIVE will set up to re-test or possibly take out its next major overhead resistance levels $8.50 to $9 a share, or even $9.50 to $10 a share.

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Groupon

Another technology player that insiders are jumping into here is Groupon (GRPN), which operates online local commerce marketplaces that connect merchants to consumers by offering goods and services at a discount worldwide. Insiders are buying this stock into strength, since shares have rallied higher by 19% over the last three months.

Groupon has a market cap of $4.9 billion and an enterprise value of $4.2 billion. This stock trades at a premium valuation, with a trailing price-to-earnings of 49. Its estimated growth rate for this year is -54.5%, and for next year it's pegged at 200%. This is a cash-rich company, since the total cash position on its balance sheet is $855.17 million and its total debt is zero.

The CEO just bought 454,166 shares, or around $3.62 million worth of stock, at $7.85 per share.

From a technical perspective, GRPN is currently trending just above both its 50-day and 200-day moving averages, which is bullish. This stock recently gapped up sharply higher from $5.70 to over $7.50 with strong upside volume flows. Shares of GRPN have now pulled back off its recent high of $8.28 a share and the stock is starting to approach both its 200-day and 50-day moving averages.

If you're in the bull camp on GRPN, then I would look for long-biased trades as long as this stock is trending above its 200-day at $7.03 or its 50-day at $6.77 a share and then once it breaks out above some key near-term overhead resistance levels at around $7.75 to $8.28 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 15.59 million shares. If that breakout triggers soon, then GRPN will set up to re-test or possibly take out its next major overhead resistance level at $9 a share. Any high-volume move above $9 will then give GRPN a chance to re-fill some of its previous gap-down-day zone from February that started near $11 a share.

 

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3D Systems

One technology player that insiders are loading up on here is 3D Systems (DDD), which operates as a provider of 3D printing centric design-to-manufacturing solutions in the U.S., Germany, the Asia-Pacific, and other European countries. Insiders are buying this stock into major weakness, since shares have dropped big by 61% so far in 2014.

3D Systems has a market cap of $3.9 billion and an enterprise value of $3.5 billion. This stock trades at a premium valuation, with a trailing price-to-earnings of 178 and a forward price-to-earnings of 34. Its estimated growth rate for this year is -14.1%, and for next year it's pegged at 42.5%. This is a cash-rich company, since the total cash position on its balance sheet is $377.33 million and its total debt is $9.89 million.

A director just bought 26,479 shares, or about $881,000 worth of stock, at $33.09 to $33.20 per share.

From a technical perspective, DDD is currently trending well below both its 50-day and 200-day moving averages, which is bearish. This stock has been downtrending badly for the last five months, with shares sliding sharply lower from its high of $69.56 a share to its new 52-week low of $32.64 a share. During that downtrend, shares of DDD have been making mostly lower highs and lower lows, which is bearish technical price action. That said, shares of DDD have now started to rebound off that $32.64 low and it's beginning to move within range of triggering a near-term breakout trade.

If you're bullish on DDD, then I would look for long-biased trades as long as this stock is trending above its new 52-week low of $32.64 a share and then once it breaks out above some near-term overhead resistance levels at $37.10 to $38.66 a share and then above $39.15 a share with high volume. Look for a sustained move or close above that level with volume that registers near or above its three-month average volume of 3.16 million shares. If that breakout develops soon, then DDD will set up to re-fill some of its previous gap-down-day zone from October that started at $44.27 a share.

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Generac

One diversified machinery player that insiders are snapping up a decent amount of stock in here is Generac (GNRC), which designs, manufactures, and markets power generation equipment and other engine powered products for the residential, light commercial, industrial, and construction markets in the U.S., Canada, and internationally. Insiders are buying this stock into weakness, since shares have dropped notably by 22% so far in 2014.

Generac has a market cap of $3 billion and an enterprise value of $3.8 billion. This stock trades at a fair valuation, with a trailing price-to-earnings of 17.6 and a forward price-to-earnings of 12.7. Its estimated growth rate for this year is -27%, and for next year it's pegged at 8.9%. This is not a cash-rich company, since the total cash position on its balance sheet is $173.16 million and its total debt is $1.11 billion.

A director just bought 25,000 shares, or about $1.05 million worth of stock, at $42.17 per share.

From a technical perspective, GNRC is currently trending above its 50-day moving average and below its 200-day moving average, which is neutral trendwise. This stock recently formed a triple bottom chart pattern at $39.08, $38.75 and $38.64 a share. Following that bottom, shares of GNRC have started to rebound sharply higher as the stock has pushed back above its 50-day moving average of $42.41 a share. That move has now pushed shares of GNRC within range of triggering a near-term breakout trade.

If you're bullish on GNRC, then I would look for long-biased trades as long as this stock is trending above its 50-day at $42.41 a share or above more near-term support at $40 a share and then once it breaks out above some near-term overhead resistance levels at $45 to $45.72 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 1.17 million shares. If that breakout kicks off soon, then GNRC will set up to re-test or possibly take out its next major overhead resistance levels at $48.27 to $50 a share, or even $54 a share.

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ConocoPhillips

One final stock with some decent insider buying is ConocoPhillips (COP), which explores for, develops, and produces crude oil, bitumen, natural gas, liquefied natural gas, and natural gas liquids worldwide. Insiders are buying this stock into modest weakness, since shares have traded off by 9.6% over the last three months.

ConocoPhillips has a market cap of $88 billion and an enterprise value of $103 billion. This stock trades at a fair valuation, with a trailing price-to-earnings of 9.5 and a forward price-to-earnings of 13.2. Its estimated growth rate for this year is 3.3%, and for next year it's pegged at -8%. This is not a cash-rich company, since the total cash position on its balance sheet is $5.78 billion and its total debt is $21.19 billion. This stock currently sports a dividend yield of 4.1%.

A vice president just bought 9,000 shares, or about $629,000 worth of stock, at $69.95 per share.
From a technical perspective, COP is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has been uptrending over the last month, with shares moving higher from its low of $63.56 to its recent high of $73.22 a share. During that uptrend, shares of COP have been making mostly higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of COP within range of triggering a major breakout trade above some key near-term overhead resistance levels.

If you're bullish on COP, then I would look for long-biased trades as long as this stock is trending above some near-term support levels at $69.54 or $68.21 a share and then once it breaks out above some key near-term overhead resistance levels at $73.22 to its 200-day moving average of $74.53 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 volume of 6.76 million shares. If that breakout materializes soon, then COP will set up to re-test or possibly take out its next major overhead resistance levels at $78 to $80 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.