Stock Quotes in this Article: ADBE, ADC, CERE, PANL, UNH

WINDERMERE, Fla. (Stockpickr) -- Corporate insiders sell their own companies’ stock for a number of reasons.
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.

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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.

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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.

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UnitedHealth Group

One stock that insiders are jumping into here is health care insurance company UnitedHealth Group (UNH). This stock has been trading flat for the last six months, with shares up just 2%.

UnitedHealth Group has a market cap of $57 billion and an enterprise value of $63 billion. This stock trades at a cheap valuation, with a trailing price-to-earnings of 10.55 and a forward price-to-earnings of 9.27. Its estimated growth rate for this year is 4.7%, and for next year it’s pegged 8.7%. This is not a cash-rich company, since the total cash position on its balance sheet is $11.44 billion and its total debt is $16.75 billion.

A director just bough 2,000 shares, or around $108,000 worth of stock, at $54.42 per share.

From a technical perspective, UNH 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 month, with shares moving higher from its low of $51.36 to its recent high of $56.25 a share. During that move, shares of UNH have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of UNH within range of triggering a near-term breakout trade.

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If you’re bullish on UNH, then I would look for long-biased trades if this stock manages to break out above some near-term overhead resistance levels at $57.01 to $58.06 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 6.2 million shares. If that breakout hits soon, then UNH will set up to re-test or possibly take out its next major overhead resistance level at $60.27 a share.

As of the most recent quarter, UnitedHealth was one of the top holdings at Daniel Loeb's Third Point.

Universal Display

A stock in the semiconductor complex that insiders are snapping up here is Universal Display (PANL), which is engaged in the research, development and commercialization of organic light emitting diode technologies and materials. Insiders are buying this stock into some notable weakness, since shares are off by 18% in the last three months.

Universal Display has a market cap of $1.24 billion and an enterprise value of $1.02 billion. This stock trades at a premium valuation, with a trailing price-to-earnings of 128.27 and a forward price-to-earnings of 32.54. Its estimated growth rate for this year is 100%, and for next year it’s pegged at 272.7%. This is a cash-rich company, since the total cash position on its balance sheet is $238.78 million and its total debt is zero.

A beneficial owner just bought 52,260 shares, or $1.37 million worth of stock, at $25.88 to $26.86 per share.

From a technical perspective, PANL is currently trending above its 50-day moving average and below its 200-day moving average, which is neutral trendwise. This stock has been uptrending strong for the last two months and change, with shares moving higher from its low of $21.55 to its recent high of $29.40 a share. During that uptrend, shares of PANL have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of PANL within range of triggering a near-term breakout trade.

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If you’re in the bull camp on PANL, then I would look for long-biased trades as long as it’s trending above some near-term support at $24, and then once it manages to break out above some near-term overhead resistance at $29.40 a share with high volume. Look for a sustained move or close above $29.40 a share with volume that hits near or above its three-month average action of 1,027,620 shares. If that breakout triggers soon, then PANL will set up to re-test or possibly take out its next major overhead resistance levels at $34.54 to $35.60 a share.

Ceres

Another stock that insiders are active in here is Ceres (CERE), which sells seeds to produce renewable biomass feedstocks that can enable the large-scale replacement of petroleum and other fossil fuels. Insiders are buying this stock into some extreme weakness, since shares are down by 48% in the last six months.

Ceres has a market cap of $113 million and an enterprise value of $58 million. This stock trades at a premium valuation, with a price-to-sales of 19.79 and a price-to-book of 1.96. Its estimated growth rate for this year is 44%, and for next year it’s pegged at -3.3%. This is a cash-rich company, since the total cash position on its balance sheet is $52.01 million and its total debt is just $161,000.

A beneficial owner just bought 42,880 shares, or around $197,000 worth of stock, at $4.61 per share. That same beneficial owner also just bought 131,264 shares, or around $615,000 worth of stock, at $4.65 per share.

From a technical perspective, CERE is currently trending above its 50-day moving average and well below its 200-day moving average, which is neutral trendwise. This stock has been uptrending strong for the last three months, with shares soaring from its low of $3.43 to its recent high of $4.94 a share. During that move, shares of CERE have been mostly making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of CERE within range of triggering a near-term breakout trade.

If you‘re bullish on CERE, then I would look for long-biased trades if this stock manages to break out above some near-term overhead resistance levels at $4.60 to $4.94 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 56,577 shares. If that breakout hits soon, then CERE will set up to re-test or possibly take out its next major over resistance levels at $5.62 to $6.16 a share.

I also featured Ceres recently in “5 Heavily Shorted Stocks Set to Report.”

Adobe Systems

One software stock that insiders are showing some love to here is Adobe Systems (ADBE). Insiders are buying this stock into some decent strength, since shares are up 24% in the last six months.

Adobe Systems has a market cap of $18.83 billion and an enterprise value $16.75 billion. This stock trades at a reasonable valuation, with a trailing price-to-earnings of 22.92 and a forward price-to-earnings of 21.02. Its estimated growth rate for this year is -40%, and for next year it’s pegged at 28.4%. This is a cash-rich company, since the total cash position on its balance sheet is $3.54 billion and its total debt is $1.51 billion. After you back out the debt, Adobe Systems has a total of $2.03 billion of cash on its balance sheet.

A beneficial owner just bought 5,000 shares, or around $190,000 worth of stock, at $38.06 per share.

From a technical perspective, ADBE is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been trading sideways for the last month, with shares moving between $36.65 on the downside and $38.78 on the upside. A high-volume move outside of the upper-end of that range will trigger a major breakout trade for shares of ADBE.

If you’re in the bull camp on ADBE, then I would look for long-biased trades if this stock manages to break out above some near-term overhead resistance levels at $38.50 to $38.78 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 4.2 million shares. If that breakout triggers soon, then ADBE 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 $43 a share.

Agree

One more stock to consider with some large insider buying is Agree (ADC), which
is
a REIT, focused primarily on the ownership, development, acquisition
and management of single tenant retail properties net leased to national
tenants. Insiders are buying this stock decent strength, since shares are up 20% during the last six months.

Agree has a market cap of $318 million and an enterprise value of $444 million. This stock trades at a reasonable valuation, with a trailing price-to-earnings of 18.41 and a forward price-to-earnings of 13.14. Its estimated growth rate for this year is -8.2%, and for next year it’s pegged at 7.4%. This is not a cash-rich company, since the total cash position on its balance sheet is $542,000 and its total debt is $125.75 million.

A director just bought 50,000 shares, or about $1.36 million worth of stock, at $27.25 per share.

From a technical perspective, ADC 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 soaring from its low of $24.37 to its recent high of $28.68 a share. During that move, shares of ADC have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of ADC within range of triggering a near-term breakout trade.

If you’re bullish on ADC, then I would look for long-biased as long as this stock is trending above its 50-day at $26.33, and then once if manages to break out above some near-term overhead resistance at $28.68 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 52,125 shares. If that breakout triggers soon, then ADC will set up to enter new 52-week high territory, which is bullish technical price action. Some possible upside targets off that breakout are $30 to $33 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 Winderemere, Fla.

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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 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.