Stock Quotes in this Article: HOS, LLY, LQDT, MSFT, KMI

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

>>Hedge Funds Hate These 5 Stocks -- Should You?

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.

>>Buy These 5 Rocket Stocks to Beat the Sideways Market

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, it's 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.

>>5 Hated Earnings Stocks You Should Love

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

Microsoft

One software player that insiders are snapping up a large amount of stock in here is Microsoft (MSFT), which develops, licenses and supports software, services and hardware devices. Insiders are buying this stock into modest strength, since shares are up by 7.6% so far in 2014.

Microsoft has a market cap of $332 billion and an enterprise value of $262 billion. This stock trades at a reasonable valuation, with a trailing price-to-earnings of 15 and a forward price-to-earnings of 13.9. Its estimated growth rate for this year is 1.5%, and for next year it's pegged at 7.1%. This is a cash-rich company, since the total cash position on its balance sheet is $87.67 billion and its total debt is $23.48 billion. This stock currently sports a dividend yield of 2.8%.

>>5 Tech Stocks Entering Breakout Mode This Week

A director just bought 2,950,501 shares, or about $116.70 million worth of stock, at $39.55 per share.

From a technical perspective, MSFT is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock recently pulled back right below its 50-day and then rebounded back above that level and has entered a medium-term uptrend. That move is quickly pushing shares of MSFT within range of triggering a major breakout trade.

If you're bullish on MSFT, then I would look for long-biased trades as long as this stock is trending above its 50-day at $39.39 or above more near-term support at $38.24 and then once breaks out above some near-term overhead resistance levels at $40.50 to $41 a share and then above its 52-week high at $41.66 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 35.05 million shares. If that breakout hits soon, then MSFT will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that move are $45 to $50 a share.

Eli Lilly

Another health care player that insiders are loading up on here is Eli Lilly (LLY), which discovers, develops, manufactures and sells pharmaceutical products worldwide. Insiders are buying this stock into decent strength, since shares are up 17.8% so far in 2014.

>>3 Biotech Stocks Under $10 to Watch

Eli Lilly has a market cap of $64.4 billion and an enterprise value of $63.7 billion. This stock trades at a cheap valuation, with a trailing price-to-earnings of 16.8 and a forward price-to-earnings of 18.8. Its estimated growth rate for this year is -33.3%, and for next year it's pegged at 15.2%. This is not a cash-rich company, since the total cash position on its balance sheet is $5.21 billion and its total debt is just $5.27 billion. This stock currently sports a dividend yield of 3.3%.

A director just bought 17,157 shares, or about $1.01 million worth of stock, at $59.19 per share.

From a technical perspective, LLY is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been trending sideways and consolidating for the last two months and change, with shares moving between $56.34 on the downside and $60.65 on the upside. Shares of LLY have started to bounce higher off its 50-day at $58.51 a share and it's now quickly moving within range of triggering a major breakout trade above the upper-end of its recent sideways trading chart pattern.

If you're in the bull camp on LLY, then I would look for long-biased trades as long as this stock is trending above its 50-day at $58.51 or above more near-term support at $56.34 and then once it breaks out above some near-term overhead resistance levels at $60.65 to its 52-week high at $61.15 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 5.34 million shares. If that breakout kicks off soon, then LLY will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that move are $65 to $70 a share.

Liquidly Services

One auction player that insiders are in love with here is Liquidity Services (LQDT), which operates online auction marketplaces for sellers and buyers of surplus, salvage and scrap assets in the U.S. Insiders are buying this stock into major weakness, since shares are off by 39% so far in 2014.

>>3 Stocks Rising on Unusual Volume

Liquidity Services has a market cap of $438 million and an enterprise value of $321 million. This stock trades at a premium valuation, with a trailing price-to-earnings of 12.8 and a forward price-to-earnings of 14.3. Its estimated growth rate for this year is -29.7%, and for next year it's pegged at -22.8%. This is a cash-rich company, since the total cash position on its balance sheet is $101.77 million and its total debt is zero.

A director just bought 180,000 shares, or about $2.27 million worth of stock, at $12.64 per share.

From a technical perspective, LQDT is currently trending well below both its 50-day and 200-day moving averages, which is bearish. This stock recently gapped down sharply from over $17 to its 52-week low of $12.05 a share with heavy downside volume. Following that gap, shares of LQDT have started to rebound off that $12.05 low and it's now quickly moving within range of triggering a big breakout trade.

If you're bullish on LQDT, then I would look for long-biased trades as long as this stock is trending above $13 or above its 52-week low of $12.05 and then once it breaks out above its gap-down-day high of $14 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 1.12 million shares. If that breakout materializes soon, then LQDT will set up to re-fill some of its previous gap-down-day zone that started just above $17 a share.

Kinder Morgan

One oil and gas transportation player that insiders are jumping into here is Kinder Morgan (KMI), which operates as a midstream and energy company in North America. Insiders are buying this stock into notable weakness, since shares are off by 8.5% so far in 2014.

>>5 Stocks Under $10 to Watch

Kinder Morgan has a market cap of $33.8 billion and an enterprise value of $69.7 billion. This stock trades at premium valuation, with a trailing price-to-earnings of 28.7 and a forward price-to-earnings of 22.1. Its estimated growth rate for this year is 20%, and for next year it's pegged at 8%. This is not a cash-rich company, since the total cash position on its balance sheet is $635 million and its total debt is $37.3 billion. This stock currently sports a dividend yield of 5.2%.

The CEO just bought 100,000 shares, or about $3.23 million worth of stock, at $32.36 per share.

From a technical perspective, KMI is currently trending above its 50-day moving average and just below its 200-day moving average, which is neutral trendwise. This stock has trending sideways and consolidating over the last month and change, with shares moving between $31.80 on the downside and $33.55 on the upside. Shares of KMI are spiking higher today right above its 50-day moving average of $32.11 and that move is quickly pushing shares of KMI within range of triggering a big breakout trade above the upper-end of its recent sideways trading chart pattern.

If you're bullish on KMI, then I would look for long-biased trades as long as this stock is trending above its 50-day at $32.11 or above more support at $31.80 and then once it breaks out above some near-term overhead resistance levels at $33.20 to $33.55 and then above its 200-day moving average at $33.81 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 6.47 million shares. If that breakout gets underway soon, then KMI will set up to re-test or possibly take out its next major overhead resistance levels at $35.60 to $39.60 a share.

Hornbeck Offshore Services

One final stock with some big insider buying is Hornbeck Offshore Services (HOS), which operates offshore supply vessels and multi-purpose support vessels primarily in the U.S. Gulf of Mexico and Latin America. Insiders are buying this stock into notable weakness, since shares are down by 21% over the last six months.

Hornbeck Offshore Services has a market cap of $1.5 billion and an enterprise value of $2 billion. This stock trades at a cheap valuation, with a trailing price-to-earnings of 13 and a forward price-to-earnings of 9.5. Its estimated growth rate for this year is 14.5%, and for next year it's pegged at 59.6%. This is not a cash-rich company, since the total cash position on its balance sheet is $439.29 million and its total debt is a whopping $1.06 billion.

The CEO just bought 50,000 shares, or about $1.93 million worth of stock, at $38.63 per share.
From a technical perspective, HOS is currently trending above its 50-day moving average and well below its 200-day moving average, which is neutral trendwise. This stock recently formed a double bottom chart pattern at $37.84 to $37.44 a share. Following that bottom, shares of HOS have now spiked higher and started to move back above its 50-day moving average of $40.27 a share. That move is now starting to push shares of HOS within range of triggering a big breakout trade above some key near-term overhead resistance levels.

If you're bullish on HOS, then look for long-biased trades as long as this stock is trending above its 50-day at $40.27 or above $39 and then once it breaks out above some near-term overhead resistance levels at $42.43 to $42.53 a share and then above $44.36 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 653,814 shares. If that breakout gets started soon, then HOS will set up to re-test or possibly take out its next major overhead resistance levels $47.31 to its 200-day moving average of $48.70 a share, or even north of $50 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.


RELATED LINKS:







Follow Stockpickr on Twitter and become a fan on Facebook.

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.