Stock Quotes in this Article: ENTG, FTI, LXRX, STJ, KMI

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.

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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.

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.

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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.

Kinder Morgan

One natural gas player that insiders are loading up on is Kinder Morgan (KMI), which owns and manages a diversified portfolio of energy transportation and storage assets. Insiders are buying this stock into some modest strength, since shares are up around 7% so far in 2012.

Kinder Morgan has a market cap of $35 billion and an enterprise value of $71 billion. This stock trades at a fair valuation, with a forward price-to-earnings of 25.42. Its estimated growth rate for this year is -14.1%, and for next year it’s pegged 72.2%. This is far from a cash-rich company, since the total cash position on its balance sheet is $775 million and its total debt is $36.42 billion.

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A director just bought 600,000 shares, or about $20.85 million worth of stock, at $34.58 per share.

From a technical perspective, KMI is currently trending above its 200-day moving average and just below its 50-day moving average, which is neutral trendwise. This stock has been trending sideways for the last month, with shares moving between $33.80 on the downside and $36.12 on the upside. A move outside of that trading range soon will likely set up the next major trend for KMI.

If you’re bullish on KMI, then I would look for long-biased trades once this stock manages to break out above some near-term overhead resistance levels at $35.06 to $35.76 a share, and then once it takes out $36.12 to $36.46 a share with high volume. Look for a sustained move or close above those levels with volume that hits near or above its three-month average action of 5.6 million shares. If those levels get taken out soon, then look for KMI to re-test or possibly take out its next major overhead resistance level at $39.09 a share.

St. Jude Medical

Another stock that insiders are jumping into here is St. Jude Medical (STJ), which develops, manufactures and distributes cardiovascular medical devices for the management of chronic pain. Insiders are buying this stock into some modest strength, since shares are up 11% so far in 2012.

St. Jude Medical has a market cap of $12 billion and an enterprise value of $13.5 billion. This stock trades at a reasonable valuation, with a trailing price-to-earnings of 16.06 and a forward price-to-earnings of 10.62. Its estimated growth rate for this year is 4.6%, and for next year it’s pegged at 5%. This is not a cash-rich company, since the total cash position on its balance sheet is $1.05 billion and its total debt is $2.52 billion.

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A director just bought 25,000 shares, or about $966,000 worth of stock, at $38.65 per share.

From a technical perspective, STJ is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has been downtrending badly for the last month, with shares moving lower from $43.76 to $37.78 a share. During that downtrend, shares of STJ have gapped down once, and mostly made lower highs and lower lows, which is bearish technical price action. That said, the stock has started to find some buying interest at around $38 a share, as shares have moved into oversold territory. The current relative strength index for STJ is 32.04, which indicates an oversold condition.

If you’re in the bull camp on STJ, then I would look for long-biased as long as it’s trending above some near-term support at $37.78 a share with strong upside volume flows. I would consider any upside volume day that registers near or above its three-month average action of 2.7 million shares as bullish. If STJ can maintain that trend, then look to add to any long positions once STJ takes out $40.43 to $41 a share with high volume.

Lexicon Pharmaceuticals

One biotechnology and drugs stock that insiders are snapping up here is Lexicon Pharmaceuticals (LXRX), which is focused on the discovery and development of breakthrough treatments for human disease. Insiders are buying this stock into some big strength, since shares are up over 60% so far in 2012.

Lexicon Pharmaceuticals has a market cap of $1.03 billion and an enterprise value of $821 million. This stock trades at a steep valuation, with a price-to-sales of 858.99 and a price-to-book of 4.09. Its estimated growth rate for this year is 35.3%, and for next year it’s pegged at 13.6%. This is a cash-rich company, since the total cash position on its balance sheet is $231.08 million and its total debt is 24.19 million.

A director and beneficial owner just bought 3 million shares, or about $6.75 million worth of stock, at $2.25 per share.

From a technical perspective, LXRX is currently trending above its 200-day moving average and below its 50-day moving average, which is neutral trendwise. This stock has recently pulled back from $2.75 right to its 200-day at $2 a share. So far, LXRX has held above its 200-day moving average.

If you‘re bullish on LXRX, then I would look for long-biased trades once it manages to break out above some near-term overhead resistance levels at $2.20 to $2.37 a share with high volume. Look for a sustained move or close above those levels with volume that hits near or above its three-month average action of 1.1 million shares. If that breakout triggers soon, then LXRX will set up to re-test or possibly take out its next major overhead resistance levels at $2.76 to $3.28 a share.

FMC Technologies

Another name that insiders are finding attractive here is energy player FMC Technologies (FTI), a chemical company serving agricultural, consumer and industrial markets globally with innovative solutions, applications and products. Insiders are buying this stock into some notable weakness, since shares are off by over 20% so far in 2012.

FMC Technologies has a market cap of $9.6 billion and an enterprise value $10.5 billion. This stock trades at a reasonable valuation, with a trailing price-to-earnings of 23.96 and a forward price-to-earnings of 16.88. Its estimated growth rate for this year is 17.9%, and for next year it’s pegged at 25.7%. This is not a cash-rich company, since the total cash position on its balance sheet is $566.20 million and its total debt is $1.53 billion.

The vice president just bought 18,750 shares, or about $748,000 worth of stock, at $39.92 per share.

From a technical perspective, FTI is currently trending well below both its 50-day and 200-day moving averages, which is bearish This stock has been downtrending badly for the last two months, with shares dropping from a high of $50.49 to its recent low of $39.25 a share. During that drop, shares of FTI have been consistently making lower highs and lower lows, which is bearish technical price action. That said, buyers have started to move into FTI at around $39.25 after the stock reached oversold levels. Its current relative strength index reading is 29.36, which indicates an oversold condition.

If you’re in the bull camp on FTI, then I would look for long-biased moves as long as this stock is trending above some near-term support at $39.25 a share with strong upside volume flows. I would consider any upside volume day that registers near or above its three-month average volume of 1.9 million shares as bullish. If FTI can maintain that trend, then this stock will set up to bounce back towards its 50-day moving average of $46.10 a share.

Entegris

One more stock to consider with some decent insider buying is Entegris (ENTG), a developer, manufacturer and supplier of products and materials used in processing and manufacturing in the semiconductor and other technology industries. Insiders are buying this stock into some modest weakness, since shares are off by 5% so far in 2012.

Entegris has a market cap of $1.14 billion and an enterprise value of $813.11 million. This stock trades at a cheap valuation, with a trailing price-to-earnings of 11.61 and a forward price-to-earnings of 12.86. Its estimated growth rate for this year is -28.8%, and for next year it’s pegged at 12.3%. This is a cash-rich company, since the total cash position on its balance sheet is $315.83 million and its total debt is zero.

A beneficial owner just bought 398,800 shares, or around $3.17 million worth of stock, at $7.83 to $8.02 per share.

From a technical perspective, ENTG is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock recently plunged from its high of $9.35 to a low of $7.50 a share with above-average volume flows. Following that plunge, shares of ENTG have started to rebound and uptrend from $7.50 to $8.36 a share. That rebound has now pushed ENTG within range of triggering a near-term breakout trade.

If you’re bullish on ENTG, then I would look for long-biased once this stock manages to break out above some near-term overhead resistance levels at $8.46 to $8.61 a share with high volume. Look for a sustained move or close above those levels with volume that hits near or above its three-month average action of 598,391 shares. If ENTG triggers that breakout soon, then look for this stock to set up to re-test or possibly take out its next major overhead resistance levels at $9.35 to $10.18 a share. Any high-volume move above those levels will then put $10.58 into focus for ENTG.

To see more stocks with notable insider buying, 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 technical analysis for small- and large-cap stocks, options, futures, commodities and currencies. Roberto studied international business at the Milwaukee School of Engineering, and he spent a year overseas studying business in Lubeck, Germany. His work has appeared on financial outlets including

CNBC.com and Forbes.com. You can follow Pedone on Twitter at www.twitter.com/zerosum24 or @zerosum24.