Stock Quotes in this Article: CVS, FSYS, HALO, NYX, TWO

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.

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.

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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 in per SEC filings.

 

Halozyme Therapeutics

In the biotechnology and drugs complex, insiders are buying up a massive amount of stock in Halozyme Therapeutics (HALO), a biopharmaceutical company developing and commercializing products targeting the extracellular matrix for the diabetes, cancer, dermatology and drug delivery markets. Insiders are loading up into strength here since this stock is up over 23% so far in 2012.

Halozyme Therapeutics has a market cap of $1.21 billion and an enterprise value of $1.15 billion. This stock trades at a rich valuation, with a price-to-sales of 21.17 and a price-to-book of 44.81. Its estimated growth rate for this year is 71.4%, and for next year it’s pegged at -187.5%. This is a cash-rich company, since the total cash position on its balance sheet is $66.33 million and its total debt is zero.

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A director and beneficial owner just bought 1.36 million shares, or $14.4 million worth of stock, at $10.61 per share.

From a technical perspective, HALO is currently trading above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending strong since it hit a recent low last October at $5.60 a share. Since tagging that low, shares of HALO have been making mostly higher lows and higher highs, which is bullish price action. This stock recently broke out above some near-term overhead resistance at $11.62 a share.

If you’re bullish on HALO, I would look for long biased trades as long as the stock is trending above that breakout price of $11.62. If this stock happens to pullback below the breakout price, then I would only get long near its 50-day moving average of $10.18 a share, as long as that moving average isn’t violated to the downside.

Fuel Systems Solutions

One stock with big insider is Fuel Systems Solutions (FSYS), which engages in the design, manufacture, and supply of alternative fuel components and systems for use in the transportation, industrial and power generation markets primarily in North America, Europe, Asia, the Pacific Rim and Latin America. Insiders are showing supreme confidence here buying into big time strength, with stock up over 66% so far in 2012.

Fuel Systems Solutions has a market cap of $549 million and an enterprise value of $457 million. This stock trades at a premium valuation, with a trailing price-to-earnings of 158 and a forward price-to-earnings of 30. Its estimated growth rate for this year is -87.4%, and for next year it’s pegged at 196.7%. This is a cash-rich company, since the total cash position on its balance sheet is $94.55 million and its total debt is $11.33 million.

A beneficial owner just bought 375,500 shares, or $9.91 million worth of stock, at $23.56 to $24.09 per share.

From a technical perspective, FSYS is currently trading above both its 50-day and 200-day moving averages, which is bullish. This has been on a tear over the last few months, with shares soaring from a low of $15.35 to its current price of $27.50 a share. That huge move higher has now pushed FSYS into overbought territory since its current relative strength index (RSI) reading is now 80.70. That said, the stock also just broke out on huge volume above $24.14 a share.

If you’re bullish on FSYS, I would only look for short-term long-biased trades as long as this stock is trending above some near-term overhead resistance at $27.65 a share. Even though this stock is overbought, it has a good chance of tagging its next major overhead resistance level of $30 a share, as long as it can continue to trend above $27.65. For a better longer-term entry point, I would look for long biased trades off a significant pullback that works off the current overbought condition.

NYSE Euronext

Another name that insiders are loading up on is investment services player NYSE Euronext (NYX), a global operator of financial markets and provider of trading technologies. Insiders are buying into strength here since shares of NYSE Euronext are up over 12% so far on the year.

NYSE Euronext has a market cap of $7.6 billion and an enterprise value of 9.26 billion. This stock trades at a cheap valuation, with a trailing price-to-earnings of 12.4 and a forward price-to-earnings of 9.4. Its estimated growth rate for this year is 5.2%, and for next year it’s pegged at 18.4%. This is not a cash-rich company, since the total cash position on its balance sheet is $432 million and its total debt is $2.08 billion.

The chairman of the board and a director just bought 52,125 shares, or around $1.5 million worth of stock, at $28.78 per share.

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From a technical perspective, NYX is currently trading above both its 50-day and 200-day moving averages, which is bullish. This stock recently found some big buying support at around $24.85 to $26 a share. Now this stock has started to trigger a major breakout with shares moving above some near-term overhead resistance at $28.60 a share. That breakout pushed the stock into levels not seen since last August.

If you’re bullish on NYX, then I would look for long biased trades as long as this stock is trending above $28.60 a share, and the upside volume is tracking in strong. One could even be a buyer once the next major breakout is triggered on a high-volume move over some near-term overhead resistance at $29.69. Look for a volume on a move above that level that registers near or well above its three-month average action of 2,806,230 shares.

CVS Caremark

A stock in the retail drug complex whos insiders are buying up a large amount of stock in is CVS Caremark (CVS), a pharmacy healthcare provider in the U.S. Insiders are buying into some mild strength here since this stock is up over 9.4% in 2012.

CVS Caremark has a market cap of $57 billion and an enterprise value of $66 billion. This stocks trades at a cheap valuation, with a trailing price-to-earnings of 17 and a forward price-to-earnings of 12. Its estimated growth rate for this year is 16.8%, and for next year it’s pegged at 12.5%. This is not a cash-rich company, since the total cash position on its balance sheet is $1.42 billion and its total debt is a whopping $10.01 billion.

A vice president just bought 46,400 shares, or about $1.99 million worth of stock, at $42.99 per share.

From a technical perspective, CVS is currently trading above both its 50-day and 200-day moving averages, which is bullish. This stock broke out above $39.15 to $39.26 a share a few months ago on huge volume. Since triggering that breakout, this stock has uptrended strong towards its current price of $44.50 a share.

If you‘re a bullish on CVS, then I would look for long biased trades as long as this stock is trending above $44 a share, and the upside volume is tracking in strong. If this stock were to trade back below $44, then I would look for long setups near the 200-day moving average of $42.97 or the 50-day moving average of $41.36 a share. I would avoid any long trades in CVS if the 50-day and 200-day were violated with big volume.

CVS, one of Warren Buffett's holdings, shows up on lists of 8 UBS Stock Picks for 2012 and 3 Health Care Buys for 2012.

Two Harbors Investment

A stock in the real estate operations complex where insiders are snapping up a notable amount of stock in is Two Harbors Investment (TWO). This company operates as a real estate investment trust (REIT), which focuses on investing in, financing and managing residential mortgage-backed securities (RMBS), and related investments. Insiders are buying into some modest strength here since the stock is up over 9.4% so far in 2012.

Two Harbors Investment has a market cap of $1.42 billion and an enterprise value of $6.5 billion. This stock trades at a cheap valuation, since its trailing price-to-earning is 7.84.This is far from a cash-rich company, since the total cash position on its balance sheet is $1.62 billion and its total debt is a whopping $6.7 billion.

The CEO and president just bought 50,000 shares, or $495,000 worth of stock, at $9.90 per share.

From a technical perspective, TWO is currently trading above both its 50-day and 200-day moving averages, which is bullish. This stock found big buying support a few months ago at around $8.40 to $8.58 a share. Since buyers stepped in at those levels, the stock has uptrended strong towards its current price of just over $10 a share. Now shares of TWO are within range of triggering a big breakout.

If you’re bullish TWO, I would look for long biased trades once this stock breaks out above some past overhead resistance at $10.15 with big volume. Traders should look for a sustained high-volume move and close above $10.15 to signal that this stock wants to trend much higher. Look for volume on that move that registers near or well above its three-month average volume of 3.138,280 shares.

To see more stocks with notable insider buying, including Sealed Air (SEE), Dominion Resources (D) and PostRock Energy (PSTR), 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 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.