Stock Quotes in this Article: AAPL, FURX, QUAD, TQNT, VRX

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 several stocks whose insiders have been doing some big buying per SEC filings.

    Quad Graphics

    Insiders are jumping into Quad Graphics (QUAD), a printer of magazines, catalogs and other commercial products. Insiders clearly see tremendous value here since this stock is off by over 60% this year.

    Quad Graphics has a market cap of $762.43 million and an enterprise value of $2.43 billion. This stock trades at a very cheap valuation, with a forward price-to-earnings of 7.46. Its estimated growth rate for this year is 1.3%, and for next year it’s pegged at -6.4%. This is far from a cash-rich company, since the total cash position on its balance sheet is $15.8 million and its total debt is $1.67 billion. The stock also sports a decent dividend yield of 4.7%, making it one of the top-yielding diversified services stocks.

    The CEO and chairman of the board just bought 61,900 shares, or $991,669 worth of stock, at $16.02 per share.

     

    From a technical standpoint, QUAD is currently trading below both its 50-day and 200-day moving averages, which is bearish. This stock sold off hard from its November high of $20.87 to its recent low of $11.96 a share. After printing that low, the stock has rebounded huge to its current price of $16.27.

    That said, the stock is starting to fail right at its 50-day moving average of $16.72. If QUAD can’t manage to trade back above that key level, then shares could be setting up to trend much lower again.

    If you’re bullish on Quad Graphics, I would get long off any weakness that takes the stock back towards some near-term support at $13.09 to $12 a share. If we don’t get that weakness and QUAD can trade back above its 50-day, then I would buy once it clears $17.06 on high volume. Look for volume that’s tracking in close to or above its three-month average action of 248.731 shares. Use a mental stop at just below $12 if you buy off weakness, and use a mental stop a few percentage points below $17.06 if you get long off strength.

    Apple

    Insiders are buying Apple (AAPL) into strength -- shares up by around 20% so far in 2011.

    Apple has a market cap of $361.62 billion and an enterprise value of $337.40 billion. This stock trades at an extremely cheap valuation, with a trailing price-to-earnings ratio of 14.06 and a forward price-to-earnings of 10. Its estimated growth rate for this year is 25.3%, and for next year it’s pegged at 12.2%. This is an extremely cash-rich company; the total cash position on its balance sheet is $25.95 billion, and its total debt is zero.

    A director just bought 2,670 shares, or about $1 million worth of stock, at $374.90 per share.

    From a technical standpoint, AAPL is currently trading below both its 50-day and 200-day moving averages, which is bearish. Shares of AAPL topped out in October at around $426 and subsequently dropped to its recent low of $363.32 a share. After hitting that low, that was right at its 200-day, the stock has rebounded to its current level near $389. I now see a few potential long entries in Apple.

    If you’re bullish on AAPL, I would consider getting long once it moves back above its 50-day at $390.85 and then above some near-term overhead resistance at $396.41 on high volume. Look for volume that’s tracking in close to or above its three-month average action of 19,083,800 shares. If we get that move, then I would add to any long position once it takes out some stiffer overhead resistance at $410 a share on high volume.

    You could also buy Apple of weakness down towards some support at $380 a share, as long as the stock doesn’t move much below that level. If you get long off weakness, then look to add more shares as the stock takes out some of the overhead resistance levels I mentioned above. If you buy around $380, then use a mental stop just below that level.

    If you get long off strength, then use a mental stop a few percentage points below $390.85. If AAPL breaks below $380 on high-volume anytime soon, then I would completely avoid trading this name from the long side for now. A high-volume move below $380 should put $360 to $350 a share into play on the downside.

    Apple shows up on recent lists of Merrill Lynch's 10 Favorite Stocks for 2010 and 9 Top Goldman Sachs Stocks for 2012. It was also featured in "5 Stocks the Big Funds Love for 2012."

    Valeant Pharmaceuticals

    Insiders are also buying up a large amount of stock in is Valeant Pharmaceuticals (VRX), a multinational, specialty pharmaceutical company that develops, manufactures and markets a range of pharmaceutical products. Insiders are paying up here and buying into strength since shares are up big in 2011 by over 60%.

    Valeant Pharmaceuticals has a market cap of $14.40 billion and an enterprise value of $19.31 billion. This stock trades at a premium valuation, with a trailing price-to-earnings of 199.87. This is far from a cash-rich company, since the total cash position on its balance sheet is $257.53 million and its total debt is a whopping $5.23 billion.

    The CFO just bought 32,500 shares, or about $1.5 million worth of stock, at $46.05 to $46.26 per share. This same CFO also just bought 11,000 shares, or $515,020 worth of stock, at $46.82 per share.

    From a technical standpoint, VRX 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 of $32.05 in October. During that uptrend, shares of VRX have been consistently making higher highs and higher lows, which is bullish price action. Now traders should watch for a big breakout to trigger if VRX can move above some near-term overhead resistance levels.

    If you‘re interested in VRX from the long side, then I would look add some stock once it breaks out above $47.58 on high volume. Look for volume that’s tracking in close to or above its three-month average action of 2.45 million shares on any future breakout. I would simply use a mental stop a few percentage points below the breakout level if you get long off strength. Target a big run on this stock back toward $56 to $57 a share if we get that high-volume breakout in the coming days or weeks.

    Valeant is one of the top holdings of Julian Robertson's Tiger Management, and it comprises 5.7% of Blue Ridge Capital's portfolio.

    Furiex Pharmaceuticals

    In the drug development and collaboration complex, insiders have bought up a large amount of stock in is Furiex Pharmaceuticals (FURX), whose product pipeline includes two marketed products and three programs in development, including late-stage compounds, in multiple therapeutic areas. Insiders are sniffing out some value here since the stock is off by around 40% in 2011.

    Furiex Pharmaceuticals has a market cap of $179.74 million and an enterprise value of $136.81 million. Its estimated growth rate for next year is 74.4%. This is a cash-rich company, with a total cash position of $54.81 million and total debt of just $10 million. After you back out the debt, Furiex's total cash comes to $44.81 million.

    A director and beneficial owner just bought 163,342 shares, or about $2.88 million worth of stock, at $17.50 to $17.65 per share. This same director also bought over $5.3 million worth of stock in November.

    From a technical standpoint, FURX is currently trading above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending strong since its October low of $12.25 a share. During that uptrend, shares have been consistently making higher lows and higher highs, which is bullish. Traders should now watch for a near-term breakout to trigger if you’re looking to play this for some quick profits.

    If you’re bullish on FURX, I would get long once it breaks out above some overhead resistance at $18.50 and $19.26 on heavy volume. (Furiex shows up on a recent list of Stocks Rising on Unusual Volume.) Look for volume that’s tracking in close to or above its three-month average action of 69,930 shares. I would then add to any long position once the stock breaks out again over $19.55 to $20 a share on high-volume. That $20 level is all the all-time high on this stock, so it should be considered very bullish once it’s taken out with volume.

    This stock can also be bought on weakness back toward $17 a share. I would use a mental stop just below the 200-day at $16.09 if you buy off weakness, and simply use a mental stop a few percentage points below $18.50 if you buy off strength.

    TriQuint Semiconductor

    In the semiconductor complex, insiders are snapping up shares of TriQuint Semiconductor (TQNT), a supplier of modules, components and foundry services for communications applications. This is yet another name that insiders are buying after a big decline; it's off by around 55% so far in 2011.

    TriQuint Semiconductor has a market cap of $826.15 million and an enterprise value of $653.99 million. This stock trades at a reasonable valuation; its trailing price-to-earnings is 9.94, and its forward price-to-earnings is 13.81. This company’s estimated growth rate for this year is -39.8%, and for next year it’s pegged at -28%. This is a cash-rich company, with a total cash position on its balance sheet of $147.22 million and total debt of zero.

    A director just bought 100,000 shares, or $431,200 worth of stock, at $4.31 per share. This same director also recently bought 14,333 shares, or $68,211 worth of stock, at $4.76 per share.

    From a technical standpoint, TQNT is currently trading below both its 50-day and 200-day moving average, which is bearish. This stock was hit hard by the sellers recently from its October high of $7.76 to a recent low of $3.97 a share. Since that low, the stock has rebounded sharply to its current price of near $5 a share. Market players should now watch TQNT for a breakout trade if a few overhead resistance levels can be cleared with volume.

    If you’re bullish on TQNT, you should look to be a buyer on any weakness and anticipate a breakout above $4.92 and $5.42 (its 50-day) a share on high volume. Look for volume on any sustained move and close above those levels that hits close to or above its three-month average action of 6,744,620 shares. I would simply use a mental stop at around $4.50 in case the stock isn’t ready to breakout just yet.

    To see more stocks with notable insider buying, including KKR (KKR), Assured Guaranty (AGO) and Shutterfly (SFLY), 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.