- 5 Big Stocks to Trade for Gains as QE3 Ends
- How to Trade the Market's Most-Active Stocks
- 4 Big Stocks Making Headlines -- and How to Trade Them
- 4 Stocks Breaking Out on Big Volume
- 5 Stocks Spiking on Unusual Volume
6 Stocks With Big Insider Activity - 17037 views
WINDERMERE, Fla. (Stockpickr) -- For the week ending May 6, insider selling at S&P 500 companies outpaced insider buying by a rather large ratio of 565 to 1. This is a continuation of a trend we have seen since the Federal Reserve started its quantitative easing program, with corporate insiders taking advantage of strength in equity prices and selling off large chunks of their stock holdings.
According to a weekly report out of Bloomberg, the total amount of insider selling was $650.4 million, and the total amount of insider buying was just $1.2 million. Once again, I would like to point that the market has not cared about this huge difference in the amount of selling to buying by insiders at the largest companies in the world.
Shorting the U.S. equities market when these ratios started to show up in favor of the bears would have lost you money. Even worse, you would have missed out on many stocks that uptrended and returned big profits. This is why I stress that market headlines do not trump an overall trend in stock prices. The trend is always what matters most -- not your opinion based off of the news. If the market wants to go up despite the heavy insider selling, then it’s foolish not to ride the wave higher.
More From Stockpickr
Nobody gets paid to be right. Traders and investors get paid to be on the right side of the trend. It never fails to baffle me how so many people will fight trends in the markets. This happens because they have lost the psychological battle of controlling their emotions. You must remain completely unemotional when trading. Your mindset shouldn’t change, whether you’re making or losing money, as long as you have strict money management policy in place. Keep losses small, and let winners run.
Nobody gets rich making a stand in equities markets. No matter how bearish the news is, or what you might feel about it, you have to take what the market gives you. Remember, often the market loves to climb a “wall of worry” and trend higher as the media fills the headlines with fear-based sensationalism. This doesn’t mean we can’t get situations where stocks to go down when headlines are bearish. It just means that before you place your bets, always make sure you have identified if there is an uptrend, downtrend or sideways trend in the markets.
Here's a look at a number of stocks with the most notable insider activity.
Stocks With Notable Insider Buying
Some of the few companies that saw notable insider buying during this recent reporting period were People’s United Financial (PBCT), Nasdaq OMX Group (NDAQ), KeyCorp (KEY), Caterpillar (CAT) and Cincinnati Financial (CINF). Earlier this month, I addressed the buying at People's United, KeyCorp and Nasdaq in "5 Stocks With Big Insider Buying."
The trend that’s most important here is the willingness of insiders at financial companies to snap up their shares, with the buying at KeyCorp, People's United and Cincinnati Financial. This is something that market players need to follow very closely in the coming weeks and months. The banks could be due for some big upside soon.
Clearly, insiders at many of these financial institutions are starting to find some value in their stocks. I would also like to point out that late last week, we saw three more financials whose insiders stepped in and bought large amounts of their shares.
Pacific Capital Bancorp
A director at Pacific Capital Bancorp (PCBC) just bought 16,175 shares, or $498,893 worth of stock, at an average price of $30.85. This bank holding company provides a range of commercial and consumer banking services to households, professionals and businesses primarily in the central coast of California. The stock is trending up on the year with shares racking up around 8% worth of gains.
From a technical standpoint, watch for a breakout in PCBC if the stock can trade above $32 a share. If it can trade above that level, then shares could run toward their next significant overhead resistance level at around $35.70.
First Midwest Bancorp
A director at First Midwest Bancorp (FMBI) just bought 37,274 shares or $465,552 worth of stock, at an average price of $12.49. This bank holding company has operations throughout the greater Chicago metropolitan area, as well as Central and Western Illinois. So far in 2011, the stock is up over 5%.
From a technical standpoint, I would be a buyer of this stock if it can manage to hold around its 200-day moving average of $11.60. The stock also has some previous support at around $11.50 to $11.10 a share. Monitor this name going forward to see if FMBI can hold at around these levels before you jump in from the long side.
First Midwest shows up on a recent list of 10 Community Bank M&A Targets.
Fifth Street Finance
One more bank stock that has seen some notable insider buying recently is Fifth Street Finance (FSC). The CEO just bought 22,000 shares or $270,844 worth of stock, at an average price of $12.30. This finance company lends to and invests in small and mid-sized companies in connection with investments by private equity sponsors. So far in 2011, this stock has pretty much done nothing, trading flat with an increase of just over 1%.
From a technical standpoint, the stock recently fell below its 50-day moving average of $12.97 a share. The 200-day moving average sits at around $11.60 a share. Only buy this name if it can show some buying support above that 200-day average, otherwise it could easily fall to its next significant support area at around $10.74 a share.
Fifth Street Finances is one of the top-yielding financial services stocks, with a yield of more than 10%.
Stocks With Notable Insider Selling
The top five stocks on the insider selling list for this reporting period were Google (GOOG), with over $45 million worth of selling; Praxair (PX), at around $43 million; Waters (WAT), at $27 million; Campbell Soup (CPB), at close to $27 million; and Equity Residential (EQR), at over $24 million. The amount of selling in these five leading stocks totaled around $167 million.
One company out of this group that saw some selling done by key insiders was Praxair, an industrial gas supplier in North and South America and one of the 20 top-yielding chemicals stocks. Praxair’s primary products for its industrial gases business are atmospheric gases (oxygen, nitrogen, argon, rare gases) and process gases (carbon dioxide, helium, hydrogen, electronic gases, specialty gases, acetylene). The stock has done decent so far in 2011, with shares up around 8%.
Over half of the selling at Praxair came from the company’s president and CEO, who exercised options that amounted to 250,000 shares or $26.58 million worth of stock at an average price of $106.80. The company’s CFO and general counsel also exercised some options that amounted to million worth of sales in their stock.
From a technical standpoint, traders should watch how this stock behaves at around it 50-day moving average of $101.83. If it trades below that price with heavy volume, then I would avoid this name. I would consider any selling volume that pushes the stock through that level that’s above the three-month average of 1.4 million shares as heavy.
One big bullish bet on Praxair comes from RS Investment Management, which had a 3.1 million-share position in the stock as of the most recent period.
Lots of selling was also seen by three key corporate insiders at Waters, one of TheStreet Ratings' top-rated life sciences stocks. This is an analytical instrument manufacturer. This stock has done well so far in 2011 with shares up over 25%, but there could be some downside in store now for this name.
The CFO, vice president of human resources and general counsel combined to sell over 278,506 shares, or $27.3 million worth of stock at an average price of $98.04. The CFO made up the bulk of the selling after options were exercised to the tune of over $17 million. CFOs understand the most about how any company is performing from financial perspective, and this large selling by Waters’ CFO could be an early warning sign
From a technical standpoint, I don’t like that Waters has recently put in a double-top chart pattern at around $100 a share. This stock has a huge gap that could get filled to the downside that would take shares toward $90. There are even some gaps below $90 that could get filled taking WAT all the way down to a notable support level at around $85 a share.
I would only be a buyer of this stock in the short term if it broke the double-top chart pattern and moved above $100 on heavy volume well above the three-month average of 705,000 shares. One could short this stock soon with a stop above $100 and add heavily to the position if Waters takes out $95.50, since that will put the big gap down in price into play quickly.
Another stock with heavy insider selling that could be forming a double-top chart pattern is real estate investment trust Equity Residential, which is focused on the acquisition, development and management of apartment properties in U.S. markets. So far in 2011, this stock has trended higher by over 14%. That said, the recent heavy selling combined with a troubling near-term chart pattern could mean Equity Residential is setting up to head much lower.
A number of key insiders at Equity Residential have been dumping a ton of stock recently. That list includes the president and CEO, general counsel, CFO, CIO and a number of directors. Most of the selling was the exercising of options that combined to total 412,812 shares, or $24.6 million worth of stock at an average price of $59.60.
From a technical standpoint, Equity Residential is starting to find some heavy resistance at around $60 a share. The stock has tested this level about six times in the past few weeks and has been unable to trade above it. Another early warning sign of a potential double chart here with Equity Residential at $60 is the declining up volume during the past couple of weeks.
One could short this stock with a stop above $60 and add heavily to the position if it falls below near-term support at around $58.34 a share. A downside target of $56.50 to $55 a share could be achieved very quickly if Equity Residential is indeed putting in a double top.
A big bullish bet on Equity Residential comes from Ken Heebner's Capital Growth Management, which reported a 1.6 million-share position in the stock as of the most recent period.
To see more stocks with notable insider activity, check out the Stocks With Notable Insider Activity 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.