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5 Stocks Flashing Insider-Buying Alerts - 6782 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, 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, 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.
A key insider has loaded up on a massive amount of stock in Hess (HES), a global integrated energy company that operates in two segments: exploration and production, and marketing and refining. Insiders are clearly finding some value here, with shares down by over 22% so far in 2011.
Hess has a market cap of $20 billion and an enterprise value of $23.6 billion. The stock currently trades at an extremely cheap valuation, with a trailing price-to-earnings ratio of 7.1 and a forward price-to-earnings of 7.5. Hess’ estimated growth rate for this year is 38.4%, and for next year it’s 9.1%. This is not a cash-rich company -- the total cash position on its balance sheet is $2.19 billion, and its total debt is over $5.5 billion.
The CEO and chairman of the board just bought 174,950 shares, or about $10 million worth of stock, at $57.17 per share. A director at the company also recently purchased 10,000 shares, or $548,700 worth of stock, at $54.87 per share.
From a technical standpoint, this stock is currently significantly below both its 50-day and 200-day moving average, which is bearish. The stock has been stuck in a nasty downtrend since May, with shares printing lower highs and lower lows on a regular basis. That said, the chart is starting to show some signs of a bullish reversal and an end to that downtrend. In just the last two months, shares of HES have started to make higher lows on increasing upside volume, which is bullish.
One way to buy this stock is to purchase it on any significant weakness with a stop just below that nearest support level at $55.36 a share. Another strategy you could use is to buy it once it breaks out above some near-term overhead resistance at $60.92 a share on higher-than-average volume. I would add to either position only after the stock trades above its 50-day moving average of $63.47 on strong volume.
Key insiders have also been loading up on large amounts of stock in Seacor Holdings (CKH), which owns, operates, invests in and markets equipment in the offshore oil and gas, industrial aviation and marine transportation industries. This stock is trending lower so far in 2011, with shares off by around 10%
Seacor Holdings has a market cap of $1.96 billion and an enterprise value of $2.15 billion. The stock trades at a cheap valuation, with a trailing price-to-earnings ratio of 9.78 and a forward price-to-earnings of 12.44. Its estimated growth rate for next quarter is 11.8%, and for next year it’s pegged at 90.8%. This is not a cash-rich company -- the total cash position on its balance sheet is $480.04 million, and its total debt is over $725 million.
The CEO just bought 26,000 shares, or about $2.2 million worth of stock, at $84.40 to $86.13 per share. Just this month, another director also bought 2,300 shares, or $196,397 worth of stock, at $85.39 per share.
From a technical standpoint, this stock is currently trading below both its 50-day and 200-day moving averages, which is bearish. This stock was hammered down big in the last few months from its high of $109.50 a share to a recent low of $80.96 a share. That said, the stock has started to base since hitting that low, at $82 to just above $90 a share. This basing chart pattern could be a launching pad for the stock’s next move.
If you want to buy this stock, I would get long off any weakness that takes it close to $85 a share. If you get long near $85, I would then add to that position only once the stock trades above both its 50-day ($94.14) and 200-day ($97.37) on above-average volume. You could also just buy strength and get long once it trades above $94.14 on strong volume.
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A beaten-down stock in the retail apparel complex whose key insiders are scooping up shares of is Coldwater Creek (CWTR), a national specialty retailer of women's apparel, accessories, jewelry and gift items sold under the Coldwater Creek brand. Insiders must be seeing some deep value in Coldwater Creek, whose stock has been pummeled this year by over 45%.
This company has a market cap of $147.30 million and an enterprise value of $127.84 million. This company is currently not profitable and has an operating cash flow of -$36 million and a levered free cash flow of -$6.42 million. Coldwater Creek has a bit more cash than debt on its balance sheet, with around $31.53 million in total cash and just over $27 million in total debt.
This struggling company recently announced a three-part plan to right the ship, consisting of a comprehensive brand marketing campaign, retail store optimization and a merchandising revitalization plan.
The CEO and chairman of the board just bought 481,714 shares, or $656,769 worth of stock, at $1.33 to $1.40 per share. This same CEO also just bought over $700,000 worth of this stock last week.
From a technical standpoint, this stock is currently trading above its 50-day moving average and below its 200-day moving average, which is neutral trendwise. The stock has just put in a monster run after it formed a double-bottom chart pattern at around 82 cents to 80 cents, with shares now trading at over $1.60. This large spike in the stock was accompanied by some big upside volume days.
That said, unless you’re a fast trader, I wouldn’t step into the stock at these levels. The current relative strength index is showing a reading of 72, which is entering overbought territory. The stock did just break out over $1.52 a share -- I featured it last week in " 5 Stocks Setting Up to Break Out" -- but it’s quickly approaching more overhead resistance at around $1.80 to $2 a share.
If you want to buy this stock, I would let it base a bit and buy it off of some big weakness. Look to get long back around $1.40 to $1.35 a share with a stop around the 50-day moving average of $1.13 a share. If we see that weakness and you start a long position, then I would only add once the stock trades above its 200-day moving average of $2.21 on above average volume.
Another stock in the energy complex that key insiders have been scooping up is Continental Resources (CLR), an independent crude oil and natural gas exploration and production company with operations in the North, South and East regions of the U.S. This stock has been trending lower so far this year, with shares off by just over 10%.
Continental has a market cap of $9.43 billion and an enterprise value of $9.98 billion. The stock trades at a reasonable forward valuation, with a trailing price-to-earnings ratio of 95 and a forward price-to-earnings of 15.8. Continental’s estimated growth rate for this year is 46.2%, and for next year it’s pegged at 30.8%. This is not a cash-rich company -- its total cash position is $261.41 million, and its total debt is $896.14 million.
The CEO and chairman of the board just bought 100,000 shares, or about $5.1 million worth of stock, at $50.85 to $52.40 per share.
From a technical standpoint, this stock is currently trading below both its 50-day and 200-day moving averages, which is bearish. The stock was recently hammered lower from its July highs of $71.77 a share to a recent low of $48.17 a share. Since that massive slide, the stock has been finding some big buying support at around $48 to $50 a share in the past two months.
If you’re looking to buy this stock, I would get long off any weakness that takes the stock closer to $52 to $50 a share. That would also be close to where my stop would be at just below $48 a share. You could also buy the next breakout above $53.50 a share that comes on above-average volume. I would add to any long position once this stock trades above $60.37 and then above its 200-day moving average of $62.32 a share on strong volume.
Keep in mind that this is a heavily shorted stock with 13.1% of the tradable short currently sold short by the bears. The bears have also been increasing their bets from the last reporting period by 3.6%, or by about 187,000 shares. I like the odds of a large short squeeze in this stock off current levels since the buying support has shown up in spades in the last few months around $48 a share.
A key insider has also done some big buying in Owens-Illinois (OI), a manufacturer of glass containers with 81 glass manufacturing plants in 21 countries. It produces glass containers for beer, ready-to-drink low alcohol refreshers, spirits, wine, food, tea, juice and pharmaceuticals. This is another situation in which insiders are finding some deep value; the stock is off by over 42% so far in 2011.
This company has a market cap of $2.91 billion and an enterprise value of $6.99 billion. The stock trades at a reasonable valuation, with a forward price-to-earnings ratio of 6.15. Owen’s estimated growth rate for the next quarter is 20%, and for next year it’s pegged at 23.6%. This is far from a cash-rich company -- its total cash position on the books is $260 million, and its total debt is over $4.3 billion.
The CEO and chairman of the board just bought 121,200 shares, or about $2 million worth of stock, at $16.56 per share.
From a technical standpoint, this stock recently collapsed from its May high of $32.32 a share to a recent low of $16 a share. The stock is now also trading below both its 50-day and 200-day moving averages, which is bearish. That said, the stock has started to form a basing pattern during the last few months between $16 and $19.60 a share. This pattern could be signaling that the downtrend is over and the stock has strong buying support at current levels.
If you’re looking to buy this stock, I would get long off any weakness below $19 a share. I would simply use a stop just below $16 a share in case the stock isn’t done trending down. I would add to any long position once the stock trades above its 50-day moving average of $20.98 a share on above-average volume.
The bottom line is that this name is attractive at current levels because it’s only a few points off that $16 support level. It might not be a bad idea to follow the CEO into the stock here since it’s also been so beaten down in the last few months.
-- 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.