Stock Quotes in this Article: ECPG, GE, LVLT, NS, ACW

 MADISON, Wis. (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.

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Encore Capital Group

One stock that insiders are snapping up a large amount of stock in is Encore Capital Group (ECPG), which provides debt management and recovery solutions for consumers and property owners across a broad range of assets. Insiders are buying this stock into modest weakness, since shares are off by 6.9% over the last three months.

 

Encore Capital Group has a market cap of $656 million and an enterprise value of $1.34 billion. This stock trades at a cheap valuation, with a trailing price-to-earnings of 10.53 and a forward price-to-earnings of 6.9. Its estimated growth rate for this year is 12.8%, and for next year it’s pegged at 16.1%. This is not a cash-rich company, since the total cash position on its balance sheet is $17.51 million and its total debt is $706.68 million.

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A director just bought 350,000 shares, or $9.8 million worth of stock, at $28 per share.

From a technical perspective, ECPG 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 two months, with shares falling from its high of $33.07 to its recent low of $26.84 a share. During that move, shares of ECPG have been consistently making lower highs and lower lows, which is bearish technical price action. That said, this stock has started to bounce off that $26.84 low and it’s now moving within range of triggering a near-term breakout trade.

If you’re bullish on ECPG, then I would look for long-biased trades as long as this stock is trending above some key support levels at $28 or $27.50 and then once it breaks out above both its 200-day at $28.86 and its 50-day at $29.43 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 198,608 shares. If that breakout hits, then ECPG will set up to re-test or possibly take out its next major overhead resistance levels at $30.80 to around $32 a share.

Accuride

Another stock that insiders are jumping into here is Accuride (ACW), a manufacturer and supplier of commercial vehicle components in North America. Insiders are buying this stock into big time strength, since shares are up sharply by 57% so far in 2013.

Accuride has a market cap of $240 million and an enterprise value of $545 million. This stock trades at a cheap valuation, with a forward price-to-earnings of 10.80. Its estimated growth rate for this year is 45.7%, and for next year it’s pegged at 194%. This is not a cash-rich company, since the total cash position on its balance sheet is $31.52 million and its total debt is $349.39 million.

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A beneficial owner just bought 122,000 shares, or about $583,000 worth of stock, at $4.77 to $4.79 per share.

From a technical perspective, ACW is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock recently bounced right off its 200-day moving average and back above its 50-day moving average. That move is now quickly pushing shares of ACW within range of triggering a near-term breakout trade.

If you’re in the bull camp on ACW, then look for long-biased as long as this stock is trending above its 50-day at $4.78 and then once it breaks out above some near-term overhead resistance levels at $5.22 to $5.75 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 321,108 shares. If that breakout triggers soon, then ACW will set up to re-test or possibly take out its next major overhead resistance levels at $6.24 to $7 a share. Any high-volume move above $7 will then put $8 to $9 into range for shares of ACW.

Nustar Energy

An oil and gas pipeline player that insiders are loading up on here is Nustar Energy (NS), which is engaged in the terminalling and storage of petroleum products, the transportation of petroleum products and anhydrous ammonia, and asphalt and fuels marketing. Insiders are buying this stock into decent strength, since shares are up 18.8% so far in 2013.

Nustar Energy has a market cap of $3.9 billion and an enterprise value of $6.3 billion. This stock trades at a cheap valuation, with a forward price-to-earnings of 18.73. Its estimated growth rate for this year is 182.2%, and for next year it’s pegged at 30.1%. This is not a cash-rich company, since the total cash position on its balance sheet is $83.60 million and its total debt is a whopping $2.45 billion. This stock currently sports a dividend yield of 8.7%.

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A director just bought 58,000 shares, or about $2.97 million worth of stock, at $51.38 per share

From a technical perspective, NS is currently trending above its 200-day moving average and just below its 50-day moving average, which is neutral trendwise. This stock recently topped out at around $55 a share and then subsequently dropped back below its 50-day at $51.79 a share. Shares of NS have now started to find some buying interest right above its 200-day at $48.44 a share and its now starting to move within range of triggering a near-term breakout trade.

If you’re bullish on NS, then look for long-biased trades as long as this stock is trending above its 200-day at $48.44 and then once it breaks out back above its 50-day at $51.79 a share with high volume. Look for a sustained move or close back above its 50-day with volume that hits near or above its three-month average action of 358,757 shares. If that breakout triggers soon, then NS will set up to re-test or possibly take out its next major overhead resistance level at $54.95 a share.

Level 3

A communication services player that insiders are jumping into here is Level 3 (LVLT), which operates as a facilities-based provider of a broad range of integrated communications services. Insiders are buying this stock into notable weakness, since shares are off by 12% so far in 2013.

Level 3 has a market cap of $4.4 billion and an enterprise value $12.2 billion. This stock trades at a reasonable valuation, with a forward price-to-earnings of 32.64. Its estimated growth rate for this year is 94.4%, and for next year it’s pegged at 663.6%. This is not a cash-rich company, since the total cash position on its balance sheet is $610 million and its total debt is a whopping $8.55 billion. This stock currently sports a dividend yield of 2.2%.

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A director just bought 10,000 shares, or about $195,000 worth of stock, at $19.54 per share.

From a technical perspective, LVLT is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has been trending sideways over the last two months and change, with shares moving between $19.12 on the downside and $22.24 on the upside. Shares of LVLT have started to bounce off the lower-end of its recent range and now the stock is quickly closing in on a near-term breakout trade.

If you’re bullish on LVLT, then look for long-biased trades as long as this stock is trending above some near-term support at $19.42 and then once it breaks out back above its 50-day at $20.42 and its 200-day at $21.39 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 1.81 million shares. If that breakout triggers soon, then LVLT will set up to re-test or possibly take out its next major overhead resistance level at $21.88 to $22.24 a share. Any high-volume move above $22.24 will then give LVLT a chance to re-fill some of its previous gap down zone from February that started at $25.26 a share.

General Electric

One more stock with some decent insider buying is conglomerate player General Electric (GE), which provides services ranging from aircraft engines, power generation, water processing and household appliances to medical imaging, business and consumer financing, media content and industrial products. Insiders are buying this stock into modest strength, since shares are up 6% so far in 2013.

General Electric has a market cap of $230 billion and an enterprise value of $490 billion. This stock trades at a reasonable valuation, with a trailing price-to-earnings of 16.49 and a forward price-to-earnings of 12.23. Its estimated growth rate for this year is 9.2%, and for next year it’s pegged at 9.6%. This is not a cash-rich company, since the total cash position on its balance sheet is $138.10 billion and its total debt is $397.30 billion. After you back out the cash, General Electric has $259.2 billion of total debt on its balance sheet. This stock currently sports a dividend yield of 3.4%.

A director just bought 10,000 shares, or about $218,000 worth of stock, at $21.80 per share.

From a technical perspective, GE is currently trending above its 200-day moving average and below its 50-day moving average, which is neutral trendwise. This stock recently formed a triple top at around $23.80 to $23.90 a share and then subsequently dropped back below its 50-day and 200-day moving averages with heavy volume. That said, shares of GE have started to bounce off its recent low of $21.11 and its now trending within range of triggering a near-term breakout trade.

If you’re bullish on GE, then look for long-biased trades as long as this stock is trending above its 200-day at $21.57, and then once it breaks out above some near-term overhead resistance levels at $22.40 to its 50-day at $23.03 a share with high volume. Look for volume on that move that hits near or above its three-month average action of 39.50 million shares. If that breakout triggers soon, then GE will set up to re-test or possibly take out its next major overhead resistance levels at $23.72 to $23.90 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 Madison, Wis.

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At the time of publication, author had no positions in stocks mentioned.

Roberto Pedone, based out of Madison, Wis., 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.