- 5 Stocks Insiders Love Right Now
- 5 Stocks the Pros Love This Summer
- 5 Stocks Under $10 Making Big Moves
- 3 Health Care Stocks Under $10 to Watch
- 5 Stocks Poised to Pop on Bullish Earnings
5 Stocks With Key Insider Buying - 19532 views
BALTIMORE (Stockpickr) -- Key corporate insiders sell their own companies’ stock for a plethora of reasons. They might need the cash for a big personal purchase such as a house or 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 level. Other times they sell because they think their stock is fully valued. Some even dump their stock holdings because they’re worried that economy could go sour and they want to lock in profits.
But they only buy their own shares for one reason: They think the stock is undervalued 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 go up, that doesn’t mean it will. Insiders can have all the conviction in the world that their stock is a bargain, but if the market doesn’t agree with them, it could end up going nowhere.
More From Stockpickr
At the end of the day, it's large institutional money managers running huge mutual funds and hedge funds that drive stock prices, not insiders. That said, many of these savvy money managers will follow insider buying activity when key insiders are snapping up shares.
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 a number of companies whose insiders have been loading up on their own stock recently per SEC filings.
One stock that insiders have been loading up on recently is Wisconsin-based holding company MGIC Investment (MTG). Through its wholly owned subsidiaries, MGIC provides private mortgage insurance in the U.S. This stock is down noticeably in 2011 by around 16%, so that could be the reason that insiders are moving into the stock.
MGIC Investment has a market cap of $1.7 billion and an enterprise value of $1.65 billion. The stock is cheap trading at a forward price-to-earnings of 6.76, and it’s trading just above the company’s book value of 8.
MGIC’s CEO, chairman and a director bought 80,000 shares or $830,986 worth of stock at an average price of $7.70. This is the first insider buying that’s hit MTG since back in November 2009.
From a technical standpoint, MTG is currently trading just below both its 50-day ($8.70) and 200-day ($8.96) moving averages, with the stock at around $8.50 a share. I wouldn’t want to be a buyer of MTG until it trades above both of those levels.
Another key thing to consider with MTG is that the stock needs to break a pattern of making lower highs. That won’t happen until the stock gets above $9 a share. If you see it start breaking above $9 on volume that’s well above the three-month average action of 5.3 million shares, then that could be a great buy point.
It would also like to point out that the stock is heavily shorted. The current short interest as a percentage of the float for MTG stands at 14.7%. The market decides that the insiders here are on to something, then we could get a nice short-squeeze, so keep this name on your trading radar.
MGIC shows up in the portfolios of Leon Cooperman's Omega Advisors, with an 8.9 million-share position; Blue Ridge Capital, with a 9.9 million-share position; and Trafelet Capital Management, at 6% of the total portfolio.
Key corporate insiders are also buying up stock at Hasbro (HAS), which is engaged in providing children’s and family leisure time products and services with a portfolio of brands and entertainment properties. This stock is virtually flat on the year, with shares down about 1.5%.
Hasbro has a market cap of $6.37 billion and an enterprise value of $6.86 billion. The stock trades at a trailing price-to-earnings of 18.64 and a forward price-to-earnings of 13.07.
From a technical standpoint, this stock is just starting to trade above its 50-day moving average of $46.02 a share. You could buy this stock now with a stop just below the 200-day moving average of $45.08 a share. I would add more to the position if HAS were to trade above some past overhead resistance at around $47.67 to $48 a share. A move above those levels could setup the stock to make a run at its 52-week high of $50.17.
If you’re looking for a bank where a key insider has buying up stock, then it’s time to look hard at diversified financial services company Wells Fargo (WFC). So far in 2011, this stock hasn’t done much to write home about, with shares off by around 5.5%.
Wells Fargo has a market cap of $153.93 billion and an enterprise value of $225.15 billion. The stock trades at a trailing price-to-earnings of 13 and a forward price-to-earnings of just 8.4.
Bank stocks are absolutely hated on Wall Street right now, mostly because the group is constantly under attack by Washington. The sector is also disliked because many investors still have concerns about the quality of their balance sheets following the 2008 financial crisis. Much of those concerns are related to housing and mortgage-related loans and product. For those exact reasons, investors should see it as a major positive that an insider at Wells Fargo is doing some buying.
The CFO and vice president of Wells Fargo recently bought 10,000 shares or $285,400 worth of stock at an average price of $28.54 .
From a technical standpoint, this stock has recently found some support at its 200-day moving average of $28.80 a share. This could make for a low risk buy point if you want to play this stock since you can still get in now at a price very close to the 200-day. You could buy here and place a mental stop just below the 200-day, so you’ll know if you’re right on this trade pretty quickly.
I would also like to point out that if Wells has found a bottom here, then it would mark a higher low from its last bottoming price in Dec. of 2010 at $26.41 a share. That’s good to see if you’re bullish on Wells because it could mean that the stock is setting up to uptrend.
Asset Acceptance Capital
A major beneficial owner has been loading up on stock in Asset Acceptance Capital (AACC), which is engaged in the purchase and collection of defaulted and charged-off accounts receivable portfolios from consumer credit originators. This stock has pretty much done nothing so far in 2011 with shares down around 3.3%.
This company has a market cap of $180.05 million and an enterprise value of $334.05 million. This is stock trades at a forward price-to-earnings of 12.51.
Nierenberg Investment Management, a beneficial owner of 10% or more of the company, bought 156,200 shares, or $830,986 worth of stock, at an average price of $5.30.
From a technical standpoint, this stock recently broke out above some past overhead resistance at $5.88 a share on monster volume. Shares of Asset Acceptance could now bet setting up to re-test 2011 highs at $6.65 and $7.21 a share. I would now watch this stock to see if it can consolidate some of the recent gains and make a run at those highs, as long as the stock can continue to close above $5.88.
First Niagara Financial
One more stock that has seen some sizable insider buying is First Niagara Financial (FNFG), which provides a range of retail and commercial banking, as well as other financial services through its wholly owned savings bank subsidiary, First Niagara Bank. First Niagara Bank is a community bank providing financial services to individuals, families and businesses through its branch network located across upstate New York and Western Pennsylvania. Keeping with the trend in this article, First Niagara's stock hasn’t done much at all in 2011, with shares up by only about 1.5%.
This company has a current market cap of $2.93 billion and an enterprise value of $7.61 billion. The stock trades at a trailing price-to-earnings of 18.74 and at a forward price-to-earnings of 12.37. The stock is currently trading just above its book value of 13.46
A director at First Niagara bought 10,000 shares, or $137,930 worth of stock, at an average price of $13.79.
From a technical standpoint, First Niagara has just started to trend above its 50-day moving average of $14.10 a share. It’s worth mention that the stock also has a ton of support at around $13.50 to $13.60 a share. I would look to buy this stock on any weakness as long as it holds those support levels. I would add to the position once it takes out $14.75 and then $15.10 which is the 52-week high.
It’s also worth noting that First Niagara is a heavily shorted stock. The current short interest as a percentage of the float for First Niagara stands at a rather large 13.2%. Keep an eye on this name for any future short-squeezes if the big money likes the insider buying here.
First Niagara was highlighted in a list of 10 Bank Stocks With Great Expectations.
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.
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.