Stock Quotes in this Article: ACHN, DG, PAY, WAG, MPO

DELAFIELD, Wis. (Stockpickr) -- Corporate insiders sell their own companies' stock for a number of reasons.

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

Walgreen

One non-cyclical consumer goods player that insiders are buying up a lot of stock in here is drugstore operator Walgreen (WAG). Insiders are buying this stock into strength, since shares are up sharply by 33% so far in 2013.

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Walgreen has a market cap of $46 billion and an enterprise value of $49 billion. This stock trades at a reasonable valuation, with a trailing price-to-earnings of 21.60 and a forward price-to-earnings of 13.95. Its estimated growth rate for this year is 6.8%, and for next year it's pegged at 13.1%. This is not a cash-rich company, since the total cash position on its balance sheet is $3.01 billion and its total debt is $6.37 billion. This stock currently sports a dividend yield of 2.6%.

A director just bought 34,439 shares, or about $1.57 million worth of stock, at $45.77 per share.

From a technical perspective, WAG is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock recently spiked back above its 50-day moving average of $48.35 a share, after it dropped dramatically from $51.22 to $43.31 a share. That spike is quickly pushing shares of WAG within range of triggering a near-term breakout trade..

If you're bullish on WAG, then I would look for long-biased trades as long as this stock is trending above its 50-day at $48.35 and then once it breaks out above some near-term overhead resistance at $50 a share to its 52-week high at $51.25 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 6.18 million shares. If that breakout hits, then WAG will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that move are $55 to $60 a share.

 

Dollar General

Another stock that insiders are active in here is discount store retailer Dollar General (DG), which offers a selection of merchandise, including consumables, seasonal, home products and apparel. Insiders are buying this stock into solid strength, since shares are up 22% so far in 2013.

Dollar General has a market cap of $17 billion and an enterprise value of $20 billion. This stock trades at a reasonable valuation, with a trailing price-to-earnings of 18.65 and a forward price-to-earnings of 14.54. Its estimated growth rate for this year is 10.3%, and for next year it's pegged at 15.6%. This is not a cash-rich company, since the total cash position on its balance sheet is $161.08 million and its total debt is $2.84 billion.

A director just bought 1,300 shares, or about $72,000 worth of stock, at $55.48 per share.

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From a technical perspective, DG 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 month and change, with shares moving higher from its low of $48.61 to its recent high of $55.80 a share. During that move, shares of DG have been mostly making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of DG within range of triggering a near-term breakout trade.

If you're in the bull camp on DG, then look for long-biased trades as long as this stock is trending above its 50-day at $52.40 and then once it breaks out above its 52-week high at $55.80 a share with high volume. Look for a sustained move or close above that level with volume that registers near or above its three-month average action of 3.38 million shares. If that breakout triggers soon, then DG will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that move are $60 to $65 a share.

VeriFone Systems

Another stock that insiders are jumping into here is VeriFone Systems (PAY), which designs, markets and services transaction automation systems that enable secure electronic payments among consumers, merchants, and financial institutions. Insiders are buying this stock into notable weakness, since shares are off by 36% so far in 2013.

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VeriFone Systems has a market cap of $2 billion and an enterprise value of $2 billion. This stock trades at a premium valuation, with a trailing price-to-earnings of 112.01 and a forward price-to-earnings of 12.29. Its estimated growth rate for this year is -49.3%, and for next year it's pegged at 8.6%. This is not a cash-rich company, since the total cash position on its balance sheet is $507.96 million and its total debt is $1.28 billion.

A director just bought 27,900 shares, or about $499,000 worth of stock, at $17.89 per share.

From a technical perspective, PAY is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock recently gapped down big from $24 to below $18 a share with heavy downside volume. Following that move, shares of PAY have rebounded and started to uptrend, with the stock moving higher from its low of $15.35 to its intraday high of $18.78 a share. During that move, shares of PAY have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of PAY within range of triggering a major breakout trade.

If you're bullish on PAY, then look for long-biased trades as long as this stock is trending above some near-term support levels at $17.34 or above $17, and then once it breaks out above its 50-day moving average of $19.52 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 volume of 3.25 million shares. If that breakout triggers soon, then PAY will set up to re-fill some of its previous gap down zone from June that started near $24 a share.

Achillion Pharmaceuticals

Another stock that insiders are in love with here is biopharmaceutical company Achillion Pharmaceuticals (ACHN), which is focused on the discovery, development and commercialization of innovative treatments for infectious diseases. Insiders are buying this stock into notable weakness, since shares are off by 24% during the last six months.

Achillion Pharmaceuticals has a market cap of $675 million and an enterprise value of $526 million. Its estimated growth rate for this year is -1.6%, and for next year it's pegged at -13.8%. This is a cash-rich company, since the total cash position on its balance sheet is $144 million and its total debt is just $611,000.

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A beneficial owner just bought 401,017 shares, or about $2.59 million worth of stock, at $6.46 to $6.47 per share. That same beneficial owner also just bought 390,944 shares, or about $2.47 million worth of stock, at $6.30 to $6.38 per share.

From a technical perspective, ACHN is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock recently gapped down sharply from $8.49 to its low of $6.12 a share with heavy downside volume. Following that move, shares of ACHN have started to rebound and uptrend, with the stock moving higher from $6.12 to its recent high of $7.27 a share. That move has started to push ACHN within range of triggering a near-term breakout trade.

If you're bullish on ACHN, then look for long-biased trades as long as this stock is trending some key near-term support levels at $6.75 to at $6.50 and then once it breaks out above some near-term overhead resistance levels at $7.27 to its 50-day at $7.51 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 volume of 1.33 million shares. If that breakout hits soon, then ACHN will set up to re-fill some of its previous gap down zone from early July that started at $8.49 a share. If that entire gap gets filled with strong volume, then ACHN could tag $9 to $9.50 a share.

I also featurec ACHN in last week's "5 Stocks Insiders Are Scooping Up."

Midstates Petroleum

One more stock with some decent insider buying is Midstates Petroleum (MPO), an independent exploration and production player focused on the application of modern drilling and completion techniques to oil-prone resources. Insiders are buying this stock into modest weakness, since shares are off by 9.5% so are in 2013.

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Midstates Petroleum has a market cap of $410 million and an enterprise value of $1.14 billion. This stock trades at a cheap valuation, with a forward price-to-earnings of 14.51. Its estimated growth rate for this year is 177.8%, and for next year it's pegged at 72%. This is not a cash-rich company, since the total cash position on its balance sheet is $50.62 million and its total debt is $796.45 million.

The CEO just bought 10,000 shares, or about $60,000 worth of stock, at $6.05 per share.

From a technical perspective, MPO is currently trending above its 50-day moving average and below its 200-day moving average, which is neutral trendwise. This stock has recently started to move back above its 50-day moving average at $6.05 a share, after finding buying interest at $5.33 a share. That move is pushing shares of MPO within range of triggering a near-term breakout trade.

If you're bullish on MPO, then look for long-biased trades as long as this stock is trending above its 50-day at $6..05 or above some more near-term support at $5.75, and then once it breaks out above some near-term overhead resistance levels at $6.70 to its 200-day at $6.85 a share and then once it takes out more resistance at $7.04 to $7.33 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 451,462 shares. If that breakout triggers soon, then MPO will set up to re-test or possibly take out its next major overhead resistance level at $8.95 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 Delafield, Wis.

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

Roberto Pedone, based out of Delafield, 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.