Stock Quotes in this Article: KTOS, RPRX, SNCR, VRX, INFU

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 where insiders have been doing some big buying in per SEC filings.

Synchronoss Technologies

One software and programming stock that insiders are snapping up right now is Synchronoss Technologies (SNCR), a provider of on-demand transaction management solutions. Insiders are buying this stock into some extreme weakness since shares are off by over 30% so far in 2012.

Synchronoss Technologies has a market cap of $790 million and an enterprise value of $685 million. This stock trades at a premium valuation, with a trailing price-to-earnings of 38.94 and a forward price-to-earnings of 15.88. Its estimated growth rate for this year is 12.2%, and for next year it’s pegged at 18.2%. This is a cash-rich company, since the total cash position on its balance sheet is $130.49 million and its total debt is just $9.25 million.

A director just bought 25,000 shares, or $517,000 worth of stock , at $20.50 per share.

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From a technical perspective, SNCR is currently trading below both its 50-day and 200-day moving averages, which is bearish. This stock recently gapped down sharply from $28 to $19.70 on monster volume. Since that plunge in price, shares of SNCR have been trending sideways between $19.70 and $21.39 a share. That massive gap lower has also created an oversold condition since its current RSI reading is 20.61.

If you’re bullish on SNCR then I would only look for long-biased trades once this stock moves back above its gap down day’s high of $22.25 a share with high volume. Look for volume on that move that’s near or well above its three-month average action of 449,347 shares. If we get that move, then this stock could spike notably higher and attempt to fill some of that gap.

I would simply avoid this stock or look for short-biased trades if it takes out that recent low of $19.70 with high-volume.

Kratos Defense & Security Solutions

Another stock that insiders are buying up is Kratos Defense & Security Solutions (KTOS), a specialized national security company engaged in providing mission critical products, services and solutions for the U.S. national security priorities. Insiders are buying this stock into weakness since shares are off by 15% so far in 2012.

Kratos Defense & Security Solutions has a market cap of $268 million and an enterprise value of $739 million. This stock trades at a cheap valuation, with a forward price-to-earnings of 8.95. Its estimated growth rate for this year is 105.70%, and for this year it’s pegged at 1,040%. This is not a cash-rich company, since the total cash position on its balance sheet is $74.80 million and its total debt is $652.30 million.

A director just bought 11,000,000 shares, or $55,000,000 worth of stock, at $5 per share.

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From a technical perspective, KTOS is currently trading below both its 50-day and 200-day moving averages, which is bearish. This stock has been downtrending hard from its February high of $7.79 to its recent low of $4.73. During that downtrend, this stock has consistently made lower highs and lower lows, which is technically bearish price action.

If you’re bullish on KTOS, then I would look for long-biased trades once it sustains a high-volume move or close back above its 50-day moving average of $5.64 a share. Look for volume on that move that’s near or well above its three-month average action of 327,402 shares. If we get that action soon, then I would add to any long positions in KTOS once it takes out some near-term overhead resistance at $6 to $6.05 a share with volume. Another strategy is to get long this stock with a mental stop below today’s low of $4.98 a share, and then add once it gets back above the 50-day moving average.

I would simply avoid any long trades in KTOS or look for short-biased trades if this stock takes out some significant previous support at $4.73 to $4.61 a share with high-volume. A move below those levels would be very bearish since KTOS has not traded under $4.61 in the last three years.

Repros Therapeutics

A biotechnology and drugs player that insiders are loading up on right now is Repros Therapeutics (RPRX), which is focused on the development of new drugs to treat hormonal and reproductive system disorders. Insiders are buying this stock into some big-time strength here since shares are up over 52% so far in 2012.

Repros Therapeutics has a market cap of $111 million and an enterprise value of $76.96 million. This stock trades at a premium valuation, with a price-to-book of 20.03. Its estimated growth rate for this year is 26.9%, and for next year it’s pegged at -3.9%. This is a cash-rich company, since the total cash position on its balance sheet is $4.57 million and its total debt zero.

A beneficial owner just bought 170,000 shares, or around $1.07 million worth of stock, at $6.35 per share.

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From a technical perspective, RPRX is currently trading significantly above both its 50-day and 200-day moving averages, which is bullish. This stock recently triggered a monster breakout trade once it took out some past overhead resistance at $5.50 with huge volume. After triggering that breakout, shares of RPRX hit a high of $8.28 a share. That move has pushed the stock into overbought territory since its current relative strength index (RSI) reading is 81.65.

If you‘re in the bull camp on RPRX, I would look for long-biased trades once this stock manages to trigger a near-term break out above $8.28 with high-volume. Look for volume on that move that’s near or well above its three-month average action of 169,463 shares. If we get that action, then this stock should easily spike towards $10 a share.

I would avoid this stock or look for short-biased trades if RPRX takes out $6.80 a share with volume. That $6.80 level is the low from the day it hit the $8.28 high.

Valeant Pharmaceuticals

Another biotechnology and drugs player that insiders are snapping up is Valeant Pharmaceuticals (VRX), a specialty pharmaceutical company that develops, manufactures, and markets pharmaceutical products in the areas of neurology, dermatology and branded generics. Insiders are buying into some modest strength here since this stock is up about 7% so far in 2012.

Valeant Pharmaceuticals has a market cap of $15.36 billion and an enterprise value of $22.87 billion. This stock trades at a premium valuation, with a forward price-to-earnings of 114.07. This is far from a cash-rich company, since the total cash position on its balance sheet is $331.53 million and its total debt is a whopping $7 billion.

A director just bought 419,000 shares, or around $21.36 million worth of stock, at $51.00 per share.

From a technical perspective, VRX is currently trading above its 200-day moving average and below its 50-day moving average, which is neutral trendwise. This stock had been trending strong for the past six months, with shares soaring from a low of $41.21 to a recent high of $59.94 a share. During that uptrend, this stock consistently made higher highs and higher lows, which is bullish price action. That said, the stock recently broke back below its 50-day moving average of $53.90 with monster volume.

If you’re a bullish on VRX, I would look for long-biased trades if this stock can manage to sustain a move or close back above its 50-day moving average of $53.90 a share high-volume. Look for volume on that move that’s near or well above its three-month average action of 1,700,930 shares. If we get that action soon, look for VRX to potentially re-test that recent high of $53.94 a share or possibly trend much higher.

I would simply avoid VRX or look for short-biased trades if it fails to trigger that move back above its 50-day, and then drops below some near-term support at $49.54 a share with heavy volume. If that $49.54 support is taken out soon, then VRX could easily drop back towards it 200-day moving average of $46.38 a share or even lower towards $43 to $41 a share.

As of the most recently reported quarter, Valeant shows up in Ruane Cunniff's portfolio and is also one of the top holdings at Lee Ainslie's Maverick Capital.

InfuSystem

One more stock whose insiders are doing some significant buying is InfuSystem (INFU), a provider of ambulatory infusion pump management services for oncologists in the U.S. Insiders are buying this stock into some decent strength here since shares are up over 24% so far in 2012.

InfuSystem has a market cap of $42.26 million and an enterprise value of $74.02 million. This stock trades at a reasonable valuation, with a forward price-to-earnings of 12.50. Its estimated growth rate for this year is -69.2%, and for next year it’s pegged at 33.3%. This is not a cash-rich company, since the total cash position on its balance sheet is $799,000 and its total debt is $29.39 million.

A director just bought 1,066,000 shares, or about $2.39 million worth of stock, at $2.25 per share.

From a technical perspective, INFU is currently trading above its 200-day moving average and below its 50-day moving average, which is neutral trendwise. This stock has been uptrending strong for the past six months, with shares spiking higher from a low of $1.43 to a recent high of $2.51 a share. During that move, this stock consistently made higher lows and higher highs, which is bullish technical price action. That said, INFU recently moved back below its 50-day moving average of 2.05 on above average volume, but the stock is now within range of taking that key average out again to the upside.

If you’re bullish on INFU, I would only look for long-biased trades if this stock can manage to sustain a move or close back above its 50-day moving average of $2.05 a share with high-volume. Look for volume on that move that’s near or well above its three-month average action of 24,381 shares. If we get that move soon, then I would add to any long positions once INFU takes out $2.51 with volume. A move over $2.51 with volume will put some previous resistance at $2.80 to $3.11 into play.

I would simply avoid INFU if it’s trending below its 50-day or if it takes out some near-term support at $1.90 with high-volume.

To see more stocks with notable insider buying, including Netflix (NFLX), Merge Healthcare (MRGE) and Herbalife (HLF), 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.