Stock Quotes in this Article: HERO, PLCE, SUMR, UTHR, XCO

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.

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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.

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

Exco Resources

An oil and gas player that insiders are snapping up a large amount of stock in is Exco Resources (XCO), an independent oil and natural gas company, engages in the exploration, exploitation, development, and production of onshore U.S. oil and natural gas properties with a focus on shale resource plays. Insiders are loading up here into weakness since this stock is down over 30% so far in 2012.

Exco Resources has a market cap of $1.5 billion and an enterprise value of $3.35 billion. This stock trades at a reasonable valuation, with a price-to-sales of 2 and a price-to-book of 1.15. Its estimated growth rate for this year is -101.8%, and for next year it’s pegged at -300%. This is far from a cash-rich company, since the total cash position on its balance sheet is $30.57 million and its total debt is a whopping $1.92 billion. This stock sports a dividend yield of 2.4%.

A director and beneficial owner just bought 700,000 shares, or around $4.74 million worth of stock, at $6.57 per share.

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From a technical perspective, XCO is currently trading above its 50-day moving average and below its 200-day moving average. This stock recently traded down to around $6.20 a share, where it subsequently found buying interest that has now pushed it back above its 50-day moving average of $6.91 a share. That move has now pushed XCO within range of triggering a near-term breakout trade.

If you’re bullish on XCO, then I would look for long-biased trades once this stock breaks out above some near-term overhead resistance at $7.20 a share with high-volume. Look for volume on that move that registers near or above its three-month average action of 6 million shares. If we get that action soon, then I would target a spike back towards its next significant overhead resistance level at $8.20, or possibly even its 200-day moving average of $8.75 a share.

I would simply avoid XCO or look for short-biased trades if it fails to trigger that breakout, and then drops back below its 50-day moving average of $6.92 a share with high-volume. If we get that action, then XCO will likely re-test and possibly take out its next significant support zones at $6.40 to $6.23 a share.

Exco shows up on a recent list of 25 Energy Stocks to Considers.

Children’s Place Retail Stores

Another name in the specialty retail complex that insiders are jumping into here is Children’s Place Retail Stores (PLCE), which provides apparel, accessories and shoes for children from newborn to 10 years old. Insiders are buying this stock into some modest weakness here since shares are off by 12% on the year.

Children’s Place Retail Stores has a market cap of $1.13 billion and an enterprise value of $886.45 million. This stock trades at a reasonable valuation, with a trailing price-to-earnings of 16.34 and a forward price-to-earnings of 12.32. Its estimated growth rate for this year is 11%, and for next year it’s pegged at 16.7%. This is a cash-rich company, since the total cash position on its balance sheet is $204.83 million and its total debt is zero.

A director just bought 15,000 shares, or about $668,500 worth of stock, at $44.57 per share.

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From a technical perspective, PLCE is currently trading above its 50-day moving average and below its 200-day moving average, which is neutral trendwise. Shares of PLCE have found buying interest during the past month and change at around $44 to $43 a share. On Tuesday, this stock soared back above its 50-day moving average of $45.85 a share, and it’s now trading with range of taking out its 200-day moving average of $48.97 a share.

If you’re in the bull camp on PLCE, then I would look for long-biased trades once this stock breaks out above its 200-day at $48.97, and then above some near-term overhead resistance at $49.76 a share with high volume. Look for volume on that move that registers or above its three-month average action of 562,917 shares. If we get that action soon, then PLCE has a great chance of re-testing and possibly taking out its April high of $53.60 a share.

On the flipside, I would avoid PLCE or look for short-biased trades if it fails to trigger that move and then drops back below its 50-day at $45.85 a share with heavy volume. A high-volume move below its 50-day will setup PLCE to possibly take out those key near-term support zones at $44 to $43 a share.

Summer Infant

Insiders are also warming up to Summer Infant (SUMR), a designer, marketer, and distributor of juvenile health, safety and wellness products, which are sold to North American and U.K. retailers. Insiders are sniffing out some deep value here since this stock is down a whopping 54% so far in 2012.

Summer Infant has a market cap of $56.98 million and an enterprise value of $121.97 million. This stock trades at a cheap valuation, with a trailing price-to-earnings of 15.21 and a forward price-to-earnings of 5.35. Its estimated growth rate for this year is -2.2%, and for next year it’s pegged at 36.4%. This is not a cash-rich company, since the total cash position on its balance sheet is $1.71 million and its total debt is $69.36 million.

A beneficial owner just bought 465,752 shares, or about $1.3 million worth of stock, at $2.75 to $2.76 per share.

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From a technical perspective, SUMR is currently trading below both its 50-day and 200-day moving averages, which is bearish. The sellers have absolutely destroyed this stock during the last six months, with shares plunging from a high of $6.33 to a recent low of $2.71 a share. During that downtrend, shares of SUMR have consistently made lower highs and lower lows, which is bearish technical price action. That said, this stock has started to find some buying interest right off that $2.71 low, and now it’s moving within range of a near-term breakout trade.

If you‘re bullish on SUMR, then I would look for long-biased trades once this stock triggers a near-term break out above $3.52, and then above its 50-day moving average of $3.89 with high-volume. In fact, traders can also look for long setups as long as SUMR is trending above $3.14 with strong volume. I would consider volume that registers near or above its three-month average action of 136,536 shares as bullish. If we get that action soon, then SUMR could re-fill a previous gap-down and trade up towards $4.75 to $5 a share.

On the flipside, I would avoid SUMR if its trending below $3.14 and below Tuesday’s low of $2.89 a share with heavy volume. If this stock starts to trend below those levels with volume, then it could easily setup to take out that recent low of $2.71 a share. I want to play this name into strength, so it’s important it stays above $3.14 and challenges those breakout levels soon.

Hercules Offshore

Another name insiders are snapping up here is oil well services and equipment player Hercules Offshore (HERO), which provides shallow-water drilling and marine services to the oil and natural gas exploration and production industry globally. Insiders are finding some deep value here since this stock has plunged 30% so far in 2012.

Hercules Offshore has a market cap of $491 million and an enterprise value of $1.16 billion. This stock trades at a reasonable valuation, with a forward price-to-earnings of 14.76. Its estimated growth rate for this year is 21.6%, and for next year it’s pegged at 152.5%. This is not a cash-rich company, since the total cash position on its balance sheet is $165.06 million and its total debt is $823.89 million.

A director just bought 50,000 shares, or around $168,000 worth of stock, at $3.30 per share.

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From a technical perspective, HERO is currently trading below both its 50-day and 200-day moving averages, which is bearish. This stock has been hammered by the bears during the past three months, with shares dropping from a high of $5.56 to a recent low of $2.91 a share. During that sharp move lower, shares of HERO have mostly made lower highs and lower lows, which is bearish technical price action. That move is quickly pushing HERO back towards some previous support zones.

If you’re in the bull camp on HERO, I would look for long-biased trades if this stock can manage to find buying interest near its previous support zones at $3.07 to $2.91 a share with strong volume. Look for volume to come in near those levels that registers close to or above its three-month average action of 4.1 million shares. Another way to play this is to simply buy HERO off strength once it clears both its 50-day at $3.98 and its 200-day at $4.17 a share with high-volume.

On the flipside, I would avoid this stock at all costs if it takes out those key near-term support levels of $3.07 to $2.91 a share with heavy volume. A high-volume move below those levels could easily setup HERO to re-test its 52-week low of $2.25 a share.

United Therapeutics

Another name to look at with some interesting insider buying is biotechnology and drugs player United Therapeutics (UTHR), which is focused on the development and commercialization of products to address the unmet medical needs of patients with chronic and life-threatening conditions. This stock hasn’t done much at all so far in 2012 with shares up just under 2%.

United Therapeutics has a market cap of $2.58 billion and an enterprise value of $2.41 billion. This stock trades at a cheap valuation, with a trailing price-to-earnings of 10.14 and a forward price-to-earnings of 9.60. Its estimated growth rate for this year is 27%, and for next year it’s pegged at 7.7%. This is a cash-rich company, since the total cash position on its balance sheet is $408.97 million and its total debt is $268.16 million. After you back out the debt, United Therapeutics has a total of $140.81 million of cash on its books.

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The CEO just bought 3,960 shares, or about $189,000 worth of stock, at $47.95 per share. The same CEO also just bought 4,138 shares, or about $198,000 worth of stock, at $47.94 per share.

From a technical perspective, UTHR is currently trading above both its 50-day and 200-day moving averages, which is bullish. Since this stock hit a low of $40.34 in April, shares have started to uptrend strong and make higher highs and higher lows, which is bullish technical price action. That move is quickly pushing UTHR within range of triggering a major breakout trade.

If you’re bullish on UTHR, then I would look for long-biased trades once this stock triggers a break out above some past overhead resistance at $49.13 to $49.17 a share with high-volume. Look for volume on that move that hits near or above its three-month average action of 724,127 shares. If we get that move soon, then UTHR will have a great chance of re-testing and possibly taking out its next significant overhead resistance levels at $51.12 to $51.98 a share.

I would simply avoid UTHR or look for short-biased trades if it fails to trigger that breakout, and then drops back below some near-term support at $47 to $46 a share with high-volume. If we get that action soon, then UTHR could re-test and possibly take out its 200-day moving average of $44.29, and its 50-day moving average of $43.82 a share.

United Therapeutics shows up on a list of Hot Biotech Stocks Traded by Hedge Funds.

To see more stocks with notable insider buying like Sonus Networks (SONS), CytRx (CYTR) and ZBB Energy (ZBB), 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.