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5 Stocks Insiders Are Loading Up On - 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.
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 whose insiders have been doing some big buying per SEC filings.
One stock that insiders are loading up in is NII Holdings (NIHD), which provides wireless communication services under the Nextel brand through operating companies located in selected Latin American markets, with its principal operations located in Mexico, Brazil, Argentina, Peru and Chile. This stock, which shows up on a recent list of 10 Top Morningstar M&A Stock Picks for 2012, hasn’t done much in 2012 with shares down by around 3%.
NII Holdings has a market cap of $3.54 billion and an enterprise value of $5.24 billion. This stock trades at a cheap valuation, with a trailing price-to-earnings of 11.68 and a forward price-to-earnings of 13.10. Its estimated growth rate for this year is -24.6%, and for next year it’s pegged at 5.3%. This is not a cash-rich company, since the total cash position on its balance sheet is $2.64 billion and its total debt is $4.46 billion.
The president just bought 37,126 shares, or $714,000 worth of stock, at $18.96 to $19.34 per share.
From a technical standpoint, NIHD is currently trading below both its 50-day and 200-day moving averages, which is neutral bearish. This stock has been stuck in a nasty downtrend for the past few months and change, with shares dropping from over $35 to a recent low of $18.82 a share. Since hitting that low, the stock has started to find some buying support with shares now trading at just over $20 a share.
If you’re bullish on NIHD, I would look to buy some shares once it moves back above its 50-day moving average of $21.32 with volume. Look for volume that’s near or well above its three-month average action of 3.04 million shares. If we get that action, then look to add to any long positions once NIHD breaks out above some near-term resistance at $22.19 a share with volume. I would simply use a mental stop on any long positions just below the 50-day if you buy off strength, or right around $18.82 a share if you get long off weakness.
NIHD also shows up on a list of 5 Telecom Picks for 2012.
Another stock that insiders are buying up is biopharmaceutical player Ziopharm Oncology (ZIOP), which is seeking to develop and commercialize a diverse portfolio of in-licensed cancer drugs that can address unmet medical needs. Insiders are buying into strength here since this stock is up over 16% in 2012.
Ziopharm Oncology has a market cap of $348 million and an enterprise value of $228 million. This stock trades at a rich valuation, with a price-to-sales of 744.27 and a price-to-book of 4.13. Its estimated growth rate for this year is -53.5%, and for next year it’s pegged at -2.8%. This is a cash-rich company, since the total cash position on its balance sheet is $118.93 and its total debt is zero.
A director and beneficial owner just bought 1,923,075 shares, or around $10 million worth of stock, at $5.20 per share.
From a technical standpoint, ZIOP is currently trading above its 50-day moving average and below its 200-day moving average, which is neutral trendwise. This stock recently found big buying support at around $4.10 to $4.15 a share, and since then it has rallied back above its 50-day moving average toward its current price of $5.30 a share. This stock is now setting up to trigger a big breakout if it can manage to clear some near-term overhead resistance levels.
If you’re bullish on ZIOP, then one could be a buyer once it triggers a breakout trade above $5.32 to $5.34 (200-day) with strong volume. Look for volume that’s near or above its three-month average action of 498,685 shares. At last check, volume today has already surpassed that level and the stock is trading at $5.25 a share. If that breakout triggers either today or in the near future, then traders should look for $5.90 or higher for ZIOP.
ZIOP shows up on a list of 13 Stocks Bought and Sold by Hedge Funds for the most recently reported quarter.
Another stock in the biotechnology and drugs complex that insiders are buying up a notable amount of is Alexza Pharmaceuticals (ALXA), which is focused on the research, development, and commercialization of products for the acute treatment of central nervous system conditions. Insiders are buying into weakness here since this stock is off by 10% so far in 2012.
Alexza has a market cap of $53.4 million and an enterprise value of $38.7 million. This stocks trades at a price-to-sales of 1.17. Its estimated growth rate for the next quarter is 21.4%, and for next year it’s pegged at 22.4%. This is a cash-rich company, with a total cash position on its balance sheet of $28.32 million and total debt of $13.64 million. After you back out the debt, Alexza has $14.68 million in cash on the books.
A beneficial owner just bought 179,041 shares, or about $145,000 worth of stock, at 80 cents per share. It looks like this purchase was part of a private placement for Occitan Capital management, which is a 10% owner of Alexza.
From a technical standpoint, ALXA is currently trading below both its 50-day and 200-day moving averages, which is bearish. This stock dropped from its November high of $1.48 to a recent low of 51 cents per share. After hitting that low, the stock has rebounded to a recent high of 99 cents, and it now trades t around 73 cents.
If you‘re a bullish on ALXA, then I would consider looking for long-biased trades once this stock breaks out above 80 cents per shares with big volume. Look for volume that’s near or well above its three-month average action of 1.02 million shares. You could also buy it off any weakness and anticipate the breakout with a mental stop just below 70 cents per share. I would then add to any long positions once ALXA takes out its 50-day moving average of 89 cents per share with heavy volume.
One stock in the oil and gas complex where insiders are snapping up a huge amount of stock in is Ferrellgas Partners (FGP), a distributor of propane and related equipment and supplies to customers primarily in the U.S. Insiders are clearly finding some value here since the stock is down over 15% in the last three months.
Ferrellgas Partners has a market cap of $1.35 billion and an enterprise value of $2.6 billion. This stock trades at a reasonable valuation, with a forward price-to-earning of 31.11. Its estimated growth rate for this year is 166.7%, and for next year it’s pegged at 42.5%. This is far from a cash-rich company, since the total cash position on its balance sheet is $13.13 million and its total debt is a whopping $1.28 billion. Ferrellgas sports a monster dividend yield of 11.5%, making It one of the highest-yielding energy stocks.
A director just bought 1,388,888 shares, or $25 million worth of stock, at $18.00 per share.
From a technical standpoint, FGP is currently trading well below both its 50-day and 200-day moving averages, which is bearish. This stock has been hammered lower in the past few months from its December high of $22.52 to its recent low of $17.06 a share. This big selloff has pushed shares of FGP into oversold territory since its relative strength (RSI) reading is just coming off of below 30 levels.
If you’re bullish FGP, I would look to be a buyer once it breaks out above some near-term overhead resistance at $17.94 a share with volume. Look for volume that’s tracking in close to or near its three-month average action of 251.421 shares. I would simply use a mental stop on any long position that’s right below $17.06 a share, since that’s the recent low.
One more stock in the biotechnology and drugs complex whose insiders are buying up shares of Is Chelsea Therapeutics (CHTP), a development stage pharmaceutical company that focuses on acquiring, developing and commercializing products for the treatment of a variety of human diseases. This stock is off to a weak start in 2012, with shares down by around 10%.
Chelsea Therapeutics has a market cap of $287 million and an enterprise value of $223 million. This stock trades at a high valuation, with a price-to-book of 6.19. Its estimated growth rate for this year is -5.5%, and for next year it’s pegged at 24%. This is a cash-rich company, since the total cash position on its balance sheet is $57.61 million and its total debt is zero.
A beneficial owner just bought 40,000 shares, or about $192,000 worth of stock, at $4.80 per share. Back in November, the chief medical officer also bought 45,141 shares, or around $200,000 worth of stock, at $4.46 per share.
From a technical standpoint, CHTP is currently trading below both its 50-day and 200-day moving averages, which is bearish. This stock hit a recent bottom at $3.25 in October, and since then it has trended higher towards its current price of $4.60. This stock is now approaching a bullish trade setup if it can manage to clear its 200-day moving average.
If you’re bullish on CHTP, I would look to be a buyer on a sustained high-volume move or close back above its 200-day moving average of $4.65 a share. Look for volume that’s tracking in close to or above its three-month average action of 469,229 shares. If we get that action, I would then look to add to any long positions once CHTP takes out its 50-day moving average of $4.99 with volume.
-- 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.