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6 Stocks With Big Insider Buying - 18974 views
WINDERMERE, Fla. (Stockpickr) -- Corporate insiders sell their own companies' stock for a variety of reasons. They might need the money for a big personal purchase such as a house or to fund a child's wedding. Sometimes they sell as part of a planned selling program that they’ve put in place for diversification purposes. Other times they sell because they think their stock is fully valued. Some even dump their own stock because they’re worried about the state of the economy and think shares could go down significantly.
But they only buy their own shares for one reason: because they think the stock will go up substantially.
I like to search the market for companies that are experiencing heavy insider buying. Remember, corporate insiders know the most about their own companies. They’re in the trenches every day and know how their business is doing. They know if big contracts are being signed. They know if demand is picking up for their products and services. Big insider buying is a positive sign worthy of your attention. It could mean that stock is severely undervalued and ready to skyrocket.
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Recently we’ve had a number of companies whose corporate insiders were buying large amounts of stock. These insiders might be buying because they like the future prospects for their company. They could be loading up because the recent market volatility has created an opportunity for them to get in on the cheap. Some could be making a long-term bet by buying up their shares right now.
In all of these cases, they’re buying because they think the stock will go up. And if they’re dropping millions of dollars into it, they most likely think the stock will go up significantly from where they got in.
Here’s a look at a number of companies whose insiders have been loading up on their own stock recently, according to SEC filings.
Deer Consumer Products
One small-cap company whose insiders have been buying a lot of stock is Deer Consumer Products (DEER), a Chinese designer, manufacturer and seller of small home and kitchen electric appliances. So far in 2011 this stock is down by around 2%.
Deer Consumer Products has a market cap of $370 million and an enterprise value of $328.20 million. The stock trades at a trailing price-to-earnings of 14.15 and a forward price-to-earnings of 9.92. The company has a strong balance sheet, with around $54 million in cash on the books and only around $9.39 million of total debt.
Ying He, Deer's chairman of the board and the CEO, recently bought 250,000 shares, or $2.8 million worth of stock, at an average price of $11.01. His purchase increased his total position by around 3%, from 8.3 million shares to 8.55 million shares.
From a technical standpoint, shares of Deer Consumer Products plunged on Monday from $11 and currently trade at around $8.80 a share. It’s worth noting that the stock has some longer-term support here at around $8 a share. There’s also some long-term support at $7 a share, so watch this stock to see if it can hold these levels.
Deer is one of TheStreet Ratings' top-rated household durable goods stocks.
Another company whose insiders have been loading up on their own stock is American Superconductor (AMSC), a power technologies firm that provides wind turbine designs and electrical control systems primarily in North America, Europe and the Asia-Pacific. This stock is down sharply on the year, with shares off by around 17%. One reason that insiders are buying could be to take advantage of the recent weakness.
American Superconductor has a market cap of $1.2 billion and an enterprise value of $936.39 million. The stock trades at a trailing price-to-earnings of 27.35 and a forward price-to-earnings of 15.02. This is another company with a very strong balance sheet, with $249.93 million of cash on their books and zero total debt.
Kevin Douglas, an under-the-radar entrepreneur-turned-investor and a beneficial owner of over 10% of the company, has recently been loading up on American Superconductor stock. Douglas recently purchases 300,000 shares, or $7 million worth of stock, at an average price of $23.24. This isn’t the first time he’s bought stock in AMSC. In fact, he’s been steadily buying shares of this power company since February of last year.
Unfortunately for Douglas, this stock has done nothing but trend lower for the past six months from its high of $38.88 to its recent low of $21.70 a share. However, the stock recently hit some longer-term support at around $22 to $21 a share and since then has bounced up to its current price of around $23 a share. If I owned this stock, or if I was thinking about buying it, I wouldn’t stay long if it ever breaks that longer-term support area.
Corporate insiders have been loading up on stock atChildren’s Place Retail Stores (PLCE), a pure-play children’s specialty apparel retailer in North America. It provides apparel and related accessories for children from newborn to 10 years old. It designs, contracts to manufacture and sells merchandise under the Children's Place brand name. This stock hasn’t done much worth writing about in 2011, with shares down by around 2.5%.
Children’s Place Retail Stores has a market cap of $1.26 billion and an enterprise value of $1.03 billion. The stock trades at a trailing price-to-earnings of 15.96 and a forward price-to-earnings of 12.6. This is also another company with a very strong balance sheet, with $185.91 million of cash on their books and zero total debt.
Norman S. Matthews, the chairman of the board, recently bought 21,000 shares, or $1 million worth of stock, at an average price of $47.29. This purchase increased his total holdings from around 36,000 shares to over 57,600 shares.
From a technical standpoint, this stock has started to break out above some past overhead resistance at around $47 a share, and it has broken above a descending trendline that had acted as an area of resistance for the past few months. The next buy signal will hit once this stock trades above $50 a share. I like how this stock is setting up, and if the uptrend continues, it should test another past resistance level at around $53.50. A move above that level will set up the stock to possibly retest its 52-week high of $57.63.
With summer quickly around the corner, it might be time to piggyback the insider buying at Cabela’s (CAB). This company, together with its subsidiaries, operates as a specialty retailer and direct marketer of hunting, fishing, camping and related outdoor merchandise. The stock is performing better than the overall market, with shares up around 14% so far in 2011.
Cabela’s has a market cap of $1.7 billion and an enterprise value of $3.95 billion. The stock trades at a trailing price-to-earnings of 15.28 and a forward price-to-earnings of 11.25.
Mark Reuben, a director at the company, recently bought 20,000 shares, or $531,500 worth of stock, at an average price of $26.46. In fact, Reuben has been buying stock steadily for the past two months, taking his total holdings to around $2.94 million.
From a technical standpoint, Cabela’s has just started to trade below its 50-day moving average of $25.40 a share. Even worse, this stock has been in a nasty downtrend since late February that has taken the stock from its 52-week high of $32.37 to its current price of around $24.30. I probably wouldn’t jump back into this name on the long side until it gets back above the 50-day moving average.
If you’re looking for some notable insider buying in the energy complex , then I have two names that you should take a hard look at. One is small-cap player Triangle Petroleum (TPLM), an oil and gas exploration and development company focused primarily on the acquisition, exploration and development of resource properties consisting mainly of unconventional oil and gas reserves. This stock is off to a strong start in 2011, with shares up around 17%.
Cambrain Capital, a beneficial owner of over 10% of the company, recently bought 80,000 shares, or $600,000 worth of stock, at an average share price of $7.50. This the second purchase by Cambrian since Nov. 5, 2010, when it bought 800,000 shares, or about $4.4 million worth pf stock, at an average price of $5.50. I love when insiders are averaging up on winning positions. It tells me they’re trend followers and are putting money to work in winning trades.
From a technical standpoint, I like the way this chart looks with TPLM making higher highs and higher lows for the past six months. I would buy it at current levels with a stop around $6.70 a share. I would add heavily to the position if it can breakout above $9.73 a share.
Another energy name where insiders are buying a lot of stock is at Chesapeake Energy (CHK), which is focused on discovering, acquiring and developing conventional and unconventional natural gas reserves onshore in the U.S. This stock has been extremely hot in 2011, with shares up around 33%.
Richard K. Davidson, a director, recently bought 20,000 shares, or $641,332 worth of stock, at an average price of $32.07. This move by Davidson increased his total holdings by around 16%, from 133,280 shares to 153,280 shares.
From a technical standpoint, this stock is potentially setting up to trade significantly higher. I would put this stock on your radar for a breakout play if it can manage to trade above some near-term overhead resistance at $36 a share. A move above that level, on volume that’s greater than the three-month average of 13.4 million shares, should send this stock off into orbit.
Chesapeake shows up in two of Stockpickr's most-popular professional portfolios. It's the top holding of T. Boone Pickens' BP Capital, as of the most-recent period, and Carl Icahn increased his position in the stock by more than 25% during the quarter. Chesapeake also shows up on a list of five North American oil stocks to consider as investments.
-- 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.