Stock Quotes in this Article: AVAV, BXC, JAKK, PRTS, SPB

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, large institutional money managers running big mutual funds and hedge funds 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.

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Jakks Pacific

One recreational products player that insiders are loading up on here is Jakks Pacific (JAKK), a producer and marketer of children's toys and other consumer products. Insiders are buying this stock into weakness, since shares are off by 20% during the last six months.

Jakks Pacific has a market cap of $239 million and an enterprise value of $205 million. This stock trades at a reasonable valuation, with a forward price-to-earnings of 15.88. Its estimated growth rate for this year is 248.7%, and for next year it’s pegged at 19%. This is barley a cash-rich company, since the total cash position on its balance sheet is $189.54 million and its total debt is $165.63 million.

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A beneficial owner just bought 858,580 shares, or about $8.94 million worth of stock, at $10.30 to $10.52 per share.

From a technical perspective, JAKK is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock recently formed a double-bottom chart pattern at $10 a share. Shares of JAKK are bouncing strongly off that $10 low and quickly moving within range of triggering a near-term breakout trade.

If you’re bullish on JAKK, then I would look for long-biased trades as long as this stock is trending above $10.50 and then once it breaks out above some near-term overhead resistance levels at $11.56 to its 50-day at $11.57 a share with high volume. Look for a sustained move or close above those levels with volume that registers near or above its three-month average action of 129,377 shares. If that breakout triggers soon, then JAKK will set up to re-test or possibly take out its next major overhead resistance levels at $12.25 to $13 a share.

U.S. Auto Parts Network

Another stock that insiders are jumping into here is U.S. Auto Parts Network (PRTS), a distributor of aftermarket auto parts and accessories. Insiders are buying this stock into big time weakness, since shares are off by 60% during the last six months.

U.S. Auto Parts Network has a market cap of $34 million and an enterprise value of $48 million. This stock trades at a cheap valuation, with a price-to-sales of 0.11 and a price-to-book of 1.20. Its estimated growth rate for this year is 58.1%, and for the next quarter it’s pegged at 16.7%. This is not a cash-rich company, since the total cash position on its balance sheet is $1.14 million and its total debt is $16.36 million

A director just bought 300,000 shares, or $435,000 worth of stock, at $1.45 per share.

From a technical perspective, PRTS 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 three months, with shares dropping from its high of $2.24 to its recent low of $1 a share. During that move, shares of PRTS have been consistently making lower highs and lower lows, which is bearish technical price action. That said, shares of PRTS have started to bounce off that $1 low and are starting to move within range of triggering a near-term breakout trade.

If you’re in the bull camp on PRTS, then look for long-biased as long as this stock is trending above $1.10 and then once it breaks out above some near-term overhead resistance levels at $1.17 to $1.28 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 63,216 shares. If that breakout triggers, then PRTS will set up to re-test or possibly take out its next major overhead resistance levels at its 50-day moving average of $1.44 to around $1.60 a share. Any high-volume move above $1.60 will then put $1.80 to $2 into range for shares of PRTS.

AeroVironment

An aerospace and defense stock that insiders are active in here is AeroVironment (AVAV), which is engaged in the design, development, production and support of unmanned aircraft systems and efficient energy systems for various industries and governmental agencies. Insiders are buying this stock into notable weakness, since shares are off by 23% during the last six months.

AeroVironment has a market cap of $409 million and an enterprise value of $267 million. This stock trades at a premium valuation, with a trailing price-to-earnings of 14.37 and a forward price-to-earnings of 37.02. Its estimated growth rate for this year is -69%, and for next year it’s pegged at 22%. This is a cash-rich company, since the total cash position on its balance sheet is $133.79 million and its total debt is zero.

A director just bought 7,000 shares, or about $124,000 worth of stock, at $17.80 per share.

From a technical perspective, AVAV is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has been downtrending over the last month after gapping down big from $22, with shares moving lower from its gap down day high of $20 to its recent low of $17.69 a share. During that move, shares of AVAV have been mostly making lower highs and lower lows, which is bearish technical price action. That said, shares of AVAV have started to bounce off that $17.69 low and now it’s quickly moving within range of triggering a near-term breakout trade.

If you’re bullish on AVAV, then look for long-biased trades as long as this stock is trending above $18, and then once it breaks out above some near-term overhead resistance at $18.87 a share with high volume. Look for a sustained move or close above that level volume that hits near or above its three-month average action of 312,359 shares. If that breakout triggers soon, then AVAV will set up to re-test or possibly take out its next major overhead resistance levels at $19.65 to $20 a share. Any high-volume move above $20 will then give AVAV a chance to re-fill some of its previous gap down zone from March that started at $22.

BlueLinx

Another stock that insiders are buying here is BlueLinx (BXC), a distributor of building products including lumber, structural panels, hardwood plywood, roofing, insulation, metal products, vinyl siding and particleboard. Insiders are buying this stock into strength, since shares are up 35% during the last six months.

BlueLinx has a market cap of $175 million and an enterprise value $563 million. This stock trades at a premium valuation, with a forward price-to-earnings of 138. Its estimated growth rate for this year is 17.6%, and for next year it’s pegged at 107.1%. This is not a cash-rich company, since the total cash position on its balance sheet is $5.19 million and its total debt is $412.78 million.

A beneficial owner just bought 13.5 million shares, or about $23.60 million worth of stock, at $1.75 per share.

From a technical perspective, BXC is currently trending above its 200-day moving average and below its 50-day moving average, which is neutral trendwise. This stock has been downtrending for the last three months, with shares moving lower from its high of $3.48 to its recent low of $2.31 a share. During that move, shares of BXC have been mostly making lower highs and lower lows, which is bearish technical price action. That said, shares of BXC have started to bounce off that $2.31 low and it’s quickly moving within range of triggering a near-term breakout trade above a key downtrend line.

Traders should now look for long-biased trades in BXC as long as it’s trending above its 200-day at $2.51 and then once it triggers a break out above its 50-day at $2.88 a share and then above some near-term resistance at $3.03 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 171,038 shares. If that breakout triggers soon, then BXC will set up to re-test or possibly take out its next major overhead resistance levels at $3.37 to $3.48 a share. Any high-volume move above those levels will then put $4 to $4.35 into range for shares of BXC.

Spectrum Brands

One more stocks to consider with some big insider buying is consumer products player Spectrum Brands (SPB), which has a market positions in six product categories: consumer batteries, pet supplies, electric shaving and grooming, electric personal care, portable lighting and home and garden control products. Insiders are buying this stock notable strength, since shares are up 27% so far in 2013.

Spectrum Brands has a market cap of $2.97 billion and an enterprise value of $6.1 billion. This stock trades at a fair valuation, with a trailing price-to-earnings of 138.26 and a forward price-to-earnings of 14.35. Its estimated growth rate for this year is 47.4%, and for next year it’s pegged at 18.5%. This is not a cash-rich company, since the total cash position on its balance sheet is $70.92 million and its total debt is a whopping $3.22 billion.

A beneficial owner just bought 40,000 shares, or about $2.26 million worth of stock, at $56.60 per share.

From a technical perspective, SPB is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending strong for the last four months, with shares soaring higher from its low of $42 to its recent high of $58.28 a share. During that uptrend, shares of SPB have been mostly making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of SPB within range of triggering a near-term breakout trade.

If you’re bullish on SPB, then look for long-biased trades as long as it’s trending above some key near-term support at $56.34 or above its 50-day at $54.49, and then once it triggers a break out above some near-term overhead resistance at $58.28 a share with high volume. Look for a sustained move or close above that level with volume that hits near or above its three-month average action of 224,897 shares. If that breakout triggers soon, then SPB will set up to enter new 52-week high territory, which is bullish technical price action. Some possible upside targets off that breakout are $63 to $65 a share.

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.