Stock Quotes in this Article: AKAM, CRY, NSPH, RST, SPWR

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.

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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.

Rosetta Stone

One stock that insiders are active in here is Rosetta Stone (RST), which develops, markets and sells language learning solutions consisting of software, online services and audio practice tools primarily under its Rosetta Stone brand. Insiders are buying this stock into some incredible strength, with shares up over 80% so far in 2012.

Rosetta Stone has a market cap of $292 million and an enterprise value of $173 million. This stock trades at a premium valuation, with a forward price-to-earnings of 55. Its estimated growth rate for this year is 70.2%, and for next year it’s pegged at 189.3%. This is a cash-rich company, since the total cash position on its balance sheet is $118.48 million, and its total debt is zero.

A director just bought 30,000 shares, or around $419,000 worth of stock, at $13.96 per share.

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From a technical perspective, RST is currently trading above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending strong for the past six months, with shares soaring from a low of $6.76 to a recent high of $14.69 a share. During that move, shares of RST have consistently made higher highs and higher lows, which is bullish technical price action. That move has pushed the stock within range of triggering a near-term breakout trade.

If you’re bullish on RST, then I would look for long-biased trades once this stock triggers a break out above some near-term overhead resistance at $14.69 a share with high volume. Look for volume on that move that’s near or above its three-month average action of 104,706 shares. Another way to play RST is to buy it off support at around $13.50 to $12.50 a share, and then add to the trade once it takes out $14.69 with volume.

I would simply avoid RST or look for short-biased trades if it fails to trigger that breakout, and then drops below support at $12.50, and its 50-day moving average of $11.92 a share with high-volume. A high-volume move below those levels would setup RST to re-test some previous support at $10.50 to $10 a share or possibly trend lower.

Cryolife

Another stock that insiders are snapping up here is Cryolife (CRY), which preserves and distributes human tissues for transplantation and develops, manufactures, and commercializes medical devices for cardiac and vascular applications. Insiders are buying this stock into some modest weakness since shares are off by just 3.9% so far in 2012.

Cryolife has a market cap of $127 million and an enterprise value of $108 million. This stock trades at a reasonable valuation, with a trailing price-to-earnings of 19.29 and a forward price-to-earnings of 13.56. Its estimated growth rate for this year is -62.9%, and for next year it’s pegged at 161.50%. This is cash-rich company, since the total cash position on its balance sheet is $21.15 million and its total debt is zero.

A director just bought 25,000 shares, or about $119,000 worth of stock, at $4.79 per share.

From a technical perspective, CRY is currently trading below both its 50-day and 200-day moving averages, which is bearish. This stock has been downtrending for the last four months, with shares sliding lower from a high of $6.02 to a recent low of $4.19 a share. During that move, shares of CRY have consistently made lower highs and lower lows which is bearish technical price action.

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If you’re in the bull camp on CRY, then I would only look for long-biased trades once it triggers a move back above its 200-day at $4.95, and then its 50-day at $4.99 a share with high-volume. Look for volume on that move that’s close to or above its three-month average action of 85,523 shares. I would only be interested in CRY if it can sustain a trend above both of those key moving averages with strong upside volume flows.

On the flipside, I would avoid CRY or look for short-biased trades if it fails to trigger that move, and then drops below some near-term support at $4.40 to $4 a share with heavy volume. A move below $4 would be very bearish for CRY since it would mean the stock has entered new 52-week-low territory.

Akamai Technologies

An internet information provider that insiders are doing some large buying in is Akamai Technologies (AKAM), which provides content delivery and cloud infrastructure services for accelerating and improving applications over the Internet in the U.S. and internationally. Insiders are buying this stock into some modest weakness since shares are off by 6% so far in 2012.

Akamai Technologies has a market cap of $5.4 billion and an enterprise value of $4.9 billion. This stock trades at a reasonable valuation, with a trailing price-to-earnings of 28.79 and a forward price-to-earnings of 16.27. Its estimated growth rate for this year is 7.2%, and for next year it’s pegged at 14.1%. This is a cash-rich company, since the total cash position on its balance sheet is $404.49 million, and its total debt is zero.

A director just bought 147,240 shares, or about $4.04 million worth of stock, at $27.45 per share. Another director also just bought 29,182 shares, or about $840,000 worth of stock, at $29.19 to $28.72 per share.

From a technical perspective, AKAM is currently trading just above its 200-day moving average and below its 50-day moving average, which is neutral trendwise. This stock has plunged big in the last two months, with shares dropping from a $39.09 to a low of $25.90 a share. Following that plunge, shares of AKAM have rebounded sharply off some past support at $25.90 to $25.96 a share. That rebound has now pushed AKAM within range of triggering a near-term breakout trade.

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If you‘re bullish on AKAM, I would now be looking for long-biased trades if this stock manages to trigger a breakout above some near-term overhead resistance at $30.48 to $31 a share with high-volume. Look for volume on that move that registers near or above its three-month average action of 3.5 million shares. If we get that move, then AKAM could easily take out its 50-day moving average of $32.69 a share, and then trend up towards its next significant resistance levels at $34.50 to $37 a share.

On the flipside, I would avoid AKAM or look for short-biased trades if that breakout fails to trigger, and then the stock moves below some near-term support at $29 to $28 a share with heavy volume. A high-volume move below those levels wills setup AKAM to re-test those past support zones at $25.96 to $25.90 a share.

Nanosphere

Another stock that insiders are loading up in here is medical equipment and supplies player Nanosphere (NSPH), which develops, manufactures, and markets molecular diagnostics platform, the Verigene System that enables genomic and protein testing on a single platform. Insiders are jumping into this stock into strength since shares are up 36% so far in 2012.

Nanosphere has a market cap of $87 million and an enterprise value of $52 million. This stock trades at a fair valuation, with a price-to-sales of 26.43 and a price-to-book of 2.21. Its estimated growth rate for this year is 18.1%, and for next year it’s pegged at 24.7%. This is a cash-rich company, since the total cash position on its balance sheet is $31.76 million and its total debt is zero.

A director and beneficial owner just bought 342,500 shares, or around $598,000 worth of stock, at $1.75 per share.

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From a technical perspective, NSPH is currently trading above both its 50-day and 200-day moving averages, which is bullish. This stock has been trading range bound for the past two months, with shares bouncing around $1.51 to $2 a share. Just recently, shares of NSPH have started to break out above some near-term overheads resistance $1.92 a share. That move is quickly pushing the stock within range of triggering an even bigger breakout trade.

If you’re in the bull camp on NSPH, I would look for long-biased trades if this stock can manage to trigger a break out above some near-term overhead resistance at $2.17 to $2.21 a share with high-volume. Look for volume on that move that hits near or above its three-month average action of 222,412 shares. If we get that action soon, then NSPH could easily tag its next significant overhead resistance levels at $2.41 to $3 a share or possibly even higher. One could also look to buy this stock off any weakness as long as some near-term support at $1.80 holds up. I would avoid this name if it takes out its 50-day at $1.76 and its 200-day at $1.61 with heavy volume.
 

SunPower
The last name to look at with some interesting insider buying is solar power player

SunPower (SPWR). This is a vertically integrated solar products and services company that designs, manufactures and delivers solar electric systems worldwide for residential, commercial and utility-scale power plant customers. It looks like insiders are finding some value here since this stock is down 18% so far in 2012.

SunPower has a market cap of $602 million and an enterprise value of $945 million. This stock trades at a cheap valuation, with a forward price-to-earnings of 10.83. Its estimated growth rate for this year is -144.4%, and for next year it’s pegged at 491.7%. This is not a cash-rich company, since the total cash position on its balance sheet is $302.14 million, and its total debt is $693.46 million.

The president just bought 20,013 shares, or about $99,000 worth of stock, at $4.95 per share.

From a technical perspective, SPWR is currently trading below both its 50-day 200-day moving averages, which is bearish. This stock has moved significantly lower in the past fourth months, with shares dropping from a high of $9.54 to a recent low of $4.51 a share. After hitting that low, the stock has started to find some buying interest, and it’s now trading within range of a near-term breakout.

If you’re bullish on SPWR, then I would look for long-biased trades once this stock breaks out above some near-term overhead resistance at $5.19 a share with high volume. Look for volume that’s close to or above its three-month average volume of 1.1 million shares. If we get that move, then I would look to add to any long positions once SPWR takes out its 50-day at $5.45 and then some more resistance at $5.67 a share with volume. Target a spike back towards its next significant overhead resistance level at $7 or possibly its 200-day moving average of $7.45 a share.

I would simply avoid SPWR or look for short-biased trades if it fails to trigger that breakout, and then drops back below that recent low of $4.51 a share with high-volume. If we get that action, then SPWR would be acting very bearish technically since it will have printed a new 52-week low.

To see more stocks with notable insider buying, including Navistar (NAV), Yelp (YELP) and McDermott International (MDR), 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.