Stock Quotes in this Article: CAKE, FURX, GLW, GTXI, SOHU

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.

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

Corning

One stock whose insiders are doing some active buying is Corning (GLW), a global, technology-based corporation. Insiders are buying into some modest strength here since this stock is up around 9% in 2012.

Corning has a market cap of $21.5 billion and an enterprise value of $17.9 billion. This stock trades at a cheap valuation, with a trailing price-to-earnings of 8 and with a forward price-to-earnings of 9.44. Its estimated growth rate for this year is -22.7%, and for next year it’s pegged at 10.3%. This is a cash-rich company, since the total cash position on its balance sheet is $5.82 billion and its total debt is $2.39 billion. After you back out the debt, Corning has $3.43 billion in cash on its balance sheet.

A director just bought 150,000 shares, or $1.91 million worth of stock, at $12.75 per share.

From a technical perspective, GLW is currently trading above its 50-day moving average and below its 200-day moving average, which is neutral trendwise. This stock has consistently found buyers in the last few months at around $12.50, and its run into selling resistance above $14 a share.

If you’re bullish on GLW, I would look for long-biased trades once this stock clears its 200-day moving average of $14.46 with volume. Look for volume on a move above those that key technical level that’s near or above its three-month average action of 20.15 million shares. If we get that action soon, I would then add to any long positions on a high-volume move over $15.66 a share.

If GLW fails to clear its 200-day soon, then I would look to be a buyer off weakness near that $12.50 support zone.

Corning, one of Maverick Capital's top holdings, shows up on a recent list of 4 Stocks Poised for an Apple iPad 3 Boost.

Cheesecake Factory

Another name that insiders are snapping up is Cheesecake Factory (CAKE), which operates upscale, casual, full-service dining restaurants in the U.S. This stock hasn’t done much in 2012, with shares up just 5.5%.

Cheesecake Factory has a market cap of $1.67 billion and an enterprise value of $1.66 billion. This stock trades at a reasonable valuation, with a trailing price-to-earnings of 18.96 and a forward price-to-earnings 14.73. Its estimated growth rate for this year is 12.8%, and for next year it’s pegged at 14.1%. This is not a cash-rich company, since the total cash position on its balance sheet is $48.21 million and its total debt is $55.09 million.

A director just bought 25,000 shares, or around $767,000 worth of stock, at $30.70 per share.

From a technical perspective, CAKE is currently trading above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending pretty strong for the last six months, with shares consistently making higher lows and higher highs. This uptrend now has CAKE trading just a few points off its 52-week high of $34.07 a share.

If you’re bullish on CAKE, then I would look for long-biased traders in this stock as long as its near-term support levels of $30.50 to $30.09 (its 50-day) hold up. If those levels hold and you get long, look to add to CAKE once it breaks out above some near-term overhead resistance at $32.47, and then its 52-week high of $34.07 a share with volume. Look for volume on any move above those levels that’s near or well above its three-month average action of 953,372 shares.

Sohu.com

Insiders are also doing some large buying in Sohu.com (SOHU), a Chinese online media, search, gaming, community and mobile service group. This stock has pretty much done nothing so far in 2012, with shares up just 2.2%.

Sohu.com has a market cap of $1.96 billion and an enterprise value of $1.14 billion. This stock trades at a cheap valuation, with a trailing price-to-earnings of 13.04 and a forward price-to-earnings of 10.80. Its estimated growth rate for this year is -21.7%, and for next year it’s pegged at 35.3%. This is an extremely cash-rich company, since the total cash position on its balance sheet is $829.52 million and its total debt is zero.

The chief operating officer just bought 60,000 shares, or $2.96 million worth of stock, at $48.90 to $49.45 per share.

From a technical perspective, SOHU is currently trading below both its 50-day and 200-day moving averages, which is bearish. This stock recently gapped down big from over $63 to below $52 a share on monster volume. Following that gap down, the stock continued to slide lower and touched a recent low of $47 a share.

If you‘re a bullish on SOHU, I would look to buy this stock into strength once it moves back above its 50-day moving average of $53.41, and then breaks out above some near-term overhead resistance at $54.20 a share with volume. Look for volume on a move above those levels that’s near or well above its three-month average action of 1.46 million shares.

I also featured Sohu.com, one of 10 BRIC Stocks for 2012, in "8 Stocks Rising on Monster Volume."

Furiex Pharmaceuticals

Insiders are loading up on stock in Furiex Pharmaceuticals (FURX), whose product pipeline includes two marketed products and three programs in development, including late-stage compounds, in multiple therapeutic areas. Insiders are buying into some big time strength here since this stock is up a whopping 41% in 2012.

Furiex Pharmaceuticals market cap of $236.5 million and an enterprise value of $204.2 million. This stock trades at a premium valuation, with a price-to-sales of 52.98 and a price-to-book of 3.20. This is a cash-rich company, since the total cash position on its balance sheet is $43.63 million and its total debt is just $10 million. When you back out the debt, Furiex has $33.63 million of cash on its books.

A director and beneficial owner just bought 52,502 shares, or around $1.87 million worth of stock, at $22.52 to $22.69 per share.

From a technical perspective, FURX is currently trading well above both its 50-day and 200-day moving averages, which is bullish. This stock recently triggered a major breakout once it cleared $18.91 with volume. That high-volume breakout was very bullish technically, and since then this stock has spiked higher towards its current price or $24 a share. This large up-move has now pushed FURX into overbought territory since its relative strength index (RSI) reading is now 85.36.

If you’re bullish FURX, I would let this stock work off some of that overbought condition before jumping in long. That overbought condition combined with how extended this stock is from its key moving averages warrants caution in the short-term. I would rather look for long biased trades on a sizeable pullback towards around $20 a share.

GTx

One more stock in the biotechnology and drugs complex whose insiders are doing some active buying is GTx (GTXI). This company is dedicated to the discovery, development and commercialization of small molecules that targets hormone pathways to treat cancer, osteoporosis and bone loss, muscle loss and other serious medical conditions. Insiders are buying into some modest strength here since the stock is up 8% so far in 2012.

GTx has a market cap of $227.97 million and an enterprise value of $142.33 million. This stock trades at a premium valuation, with a price-to-sales of 14.70 and a price-to-book of 3.01. Its estimated growth rate for this year is -19%, and for next year it’s pegged at -20.3%. This is easily a cash-rich company, since the total cash position on its balance sheet is $74.44 million and its total debt is $94,000.

A director and beneficial owner just bought 866,623 shares, or about $2.88 million worth of stock, at $3.33 per share.

From a technical perspective, GTXI is currently below both its 50-day and 200-day moving averages, which is bearish. This stock recently gapped down huge from over $6 to below $3.50 a share on monster volume. After that big gap down, the stock continued to slide lower and hit a recent low of $3.24 a share.

If you’re bullish on GTXI, I would look for long biased trades once this stock takes out some near-term overhead resistance at $3.65 a share, and then its 50-day moving average of $4.33 a share with heavy volume. Look for volume on a move above those levels that’s near or well above its three-month average volume of 628,687 shares. If we get that action soon, then look for GTXI to fill some of that gap down and spike significantly higher.

To see more stocks with notable insider buying, including China Information Technology (CNIT), Universal Display (PANL) and Skullcandy (SKUL), 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.