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5 Stocks With Big Insider Buying - 21038 views
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.
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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, it could end up going nowhere. Also, I say majority of the time because sometimes insiders are loaned money by the company to buy their own stock. Those loans are often times 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.
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 where insiders have been doing some big buying in per SEC filings.
One stock that a key insider is snapping up some shares of is Huntington Bancshares (HBAN), a bank holding company. Huntington provides consumer banking services, mortgage banking services, automobile financing, equipment leasing, investment management, trust services, brokerage services, customized insurance programs and other financial products and services. Insiders are buying this stock on weakness since shares are off by around 11% so far this year.
Huntington has a current market cap of $5.2 billion and an enterprise value of $9.2 billion. The stock trades at a reasonable valuation with a trailing price-to-earnings of 18 and a forward price-to-earnings of 8.9. With $5.7 billion on total debt on its balance sheet and just $1.8 billion in cash, Huntington Bancshares is not a cash-rich company.
The CEO just bought 41,525 shares, or $249,981 worth of stock, at $6.02 per share. This same CEO also bought $248,000 worth of Huntington stock back in late May at $6.37 per share. A Huntington director also just bought 20,000 shares, or $121,000 worth of stock, at $6.06 per share.
From a technical standpoint, shares of Huntington have been downtrending for the past seven months from a high of $7.68 to its current price of close to $6 a share. The stock is currently trading below both its 50-day and 200-day moving averages. That said, the stock is starting to find some buying support at around $6 to $5.92 a share.
If you want to buy this stock, I would look for a high volume up day that takes shares of HBAN back above its 50-day moving average of $6.32 a share. Look for volume that’s close to or above its three-month average action of 14 million shares. I would add to any long position above $6.50 (200-day) and then above $6.74 to $7 a share.
Keep in mind that a debt ceiling resolution could send the financial stocks higher in a relief rally. I would bail on any long trade if you see Huntington break below $5.92 on heavy volume.
Huntington shows up on a recent list of 12 Stocks With Increasing Dividends.
One stock in the investment services sector that insiders have been buying up is Interactive Brokers Group (IBKR), an automated global electronic market maker and broker specializing in routing orders and executing and processing trades in securities, futures, foreign exchange instruments, bonds and mutual funds on more than 90 electronic exchanges and trading venues worldwide. It looks like insiders are finding some value here since shares are off by over 14% so far in 2011.
This company just reported a decent quarter, beating Wall Street earnings estimates by 1 cent due to higher revenue from its market making and electronic brokerage segments. Second-quarter revenue was $297 million, vs. $226 million from a year ago. Market-making revenue soared 53% to $125.8 million, and electronic brokerage revenue was up 17% to $169.7 million.
Interactive Brokers has a market cap of $639 million and an enterprise value of -$13.6 billion. This stock trades at a trailing price-to-earnings of 207.53 and a forward price-to-earnings of 12.4. This is a cash-rich company, with a whopping $19.5 billion in cash on its balance sheet and $5.24 billion in total debt. When you back out the debt, Interactive Brokers has around $14.3 billion in cash on its books.
A director just bought 10,000 shares, or $228,000 worth of stock, at $15.20 per share. This same director also just bought 10,000 shares, or $151,200 worth of stock, at $15.12 per share.
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From a technical standpoint, this stock is currently trading below both its 50-day and 200-day moving averages, which is bearish. That said, shares of Interactive Brokers are trading right around a big previous support zone close to $15 a share. If this support zone doesn’t hold, then shares of Interactive Brokers could be setting up to test its next significant support level at around $14.19 a share.
One could be a buyer of this stock at around $15 and look for a quick trade back towards the 50-day moving average of $15.92 a share. I would not look for more than that out of this name right now unless you see it break the lower high price pattern that started back in early May. You’ll know that pattern is broken if Interactive Brokers trades back above its 200-day moving average of $16.36 a share.
In the banking sector, insiders have been active in financial holding company JPMorgan Chase (JPM). JPMorgan’s activities are organized into six business segments: investment bank, retail financial services, card services, commercial banking, treasury and securities services and asset management. Insiders might think this stock is ready to break out of a range since shares are down 3% so far in 2011.
JPMorgan has a market cap of $162 billion and an enterprise value of -$81 billion. The stock trades at an extremely cheap valuation with a trailing price-to-earnings of 8.7 and a forward price-to-earnings of 7.2. JPMorgan is a cash-rich company, with $993.92 billion in cash on its balance sheet and $745.84 billion in total debt. After you back out the debt, the company is sitting on a pile of cash with $248 billion.
From a technical standpoint, this stock has been in a clear downtrend for the past four months with shares sliding lower from a recent high of $47.80 to its current price of around $41 a share. The stock is also trading below its 200-day moving average and right at its 50-day moving average of $41.14 a share.
This stock could be setting up for a solid long trade off of any agreement in Congress over the debt ceiling debate. One could be a buyer of this stock once it moves above that 50-day moving average of $41.14. I would add aggressively to any long position if you see JPM take out $42.55 on solid volume. Look for volume that’s near or well above its three-month average action of 32 million shares.
Brown & Brown
Insiders have also been buying up stock Brown & Brown (BRO), a diversified insurance agency, wholesale brokerage, insurance programs and service organization. It markets and sells insurance products and services to its customers in the property, casualty and employee benefits areas. This stock is off to a slow start so far in 2011, with shares of by around 7%.
Brown & Brown has a market cap of $3.1 billion and an enterprise value of $3 billion. This stock trades at a reasonable valuation with a price-to-earnings of 20 and a forward price-to-earnings of 17. It has a bit more cash than debt on its balance sheet, with $286 million in cash and $251.69 million in total debt.
The CFO, senior vice president and treasurer at Brown & Brown recently bought 20,000 shares, or $436,400 worth of stock, at $21.82 per share.
From a technical standpoint, this stock was recently hit hard, falling from $26 a share to its current level of around $22 a share. Shares of BRO are now trading below both the 50-day and 200-day moving averages, which is bearish. That said, the stock is very oversold with its relative strength index reading currently at 28.
This stock could be setting up for a decent rebound trade as long as it holds its recent low of $21.55 a share. One could be a buyer of this name once it trades above $22.50 on solid volume that’s either close to or well above its three-month average action of 867,000 shares. A move above $22.50 on strong volume could mean the stock wants to fill some of the gap above it back towards $24 a share.
One final stock that has seen some decent insider buying is Celsion (CLSN), an oncology drug development company focused on improving treatment for those suffering with aggressive and difficult to treat forms of cancer. Its lead product, ThermoDox, is being evaluated in a phase III clinical trial for primary liver cancer and a phase II study for recurrent chest wall breast cancer. Insiders are clearly paying up to own shares here since this stock is up over 86% so far in 2011.
Celsion has a market cap of $59 million and an enterprise value of $66 million. This company isn’t profitable yet, and its operating cash flow is -$14.71 million, with levered free cash flow at -$9.77 million.
A director just bought 46,838 shares, or $199,998 worth of stock, at $4.27 per share. This same director also bought $95,000 worth of stock back in late May at $2.77 per share. A number of other insiders at Celsion also were busy snapping up shares in May.
From a technical standpoint, shares of Celsionare currently trading above both its 50-day and 200-day moving averages, which is bullish. The chart for Celsionalso shows a pattern of higher lows since June, which also displays a bullish trend for the stock. This stock recently broke out above some stiff overhead resistance at around $3.44 to $3.50 a share.
One could be a buyer of this stock on any weakness as long as it doesn’t trade back below its recent low of $3.51, which is also the key breakout level. I would add aggressively to any long position if you see Celsiontake out its 52-week high of $4.37 a share. A move back below $3.50 on heavy volume would get me out of any long trades on this name.
Celsion shows up on a recent list of 10 Cheap Biotech Stocks That Could Soar.
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.