DELAFIELD, Wis. (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.
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 several stocks that insiders have been doing some big buying in per SEC filings.
Tessera Technologies
One technology player that insiders are snapping up a large amount of stock in here is Tessera Technologies (TSRA), which, through its subsidiaries, develops, licenses and delivers miniaturization technologies and products for electronic devices worldwide. Insiders are buying this stock into decent strength, since shares are up 19% so far in 2013.
Tessera Technologies has a market cap of $1.06 billion and an enterprise value of $641 million. This stock trades at a reasonable valuation, with a forward price-to-earnings of 12.15. Its estimated growth rate for the next quarter is 237.5%, and for next year it's pegged at 374.6%. This is a cash-rich company, since the total cash position on its balance sheet is $380.51 million and its total debt is zero. This stock currently sports a dividend yield of 2.1%.
A director just bought 400,000 shares, or about $7.57 million worth of stock, at $18.79 to $19.11 a share.
From a technical perspective, TSRA is currently trending below its 50-day moving average and above its 200-day moving average, which is neutral trendwise. This stock has been downtrending for the last month and change, with shares dropping from its high of $22.59 to its recent low of $18.62 a share. During that downtrend, shares of TSRA have been making mostly lower highs and lower lows, which is bearish technical price action. That said, shares of TSRA have started to rebound off that $18.62 low and it's starting to move within range of triggering a near-term breakout trade.
If you're bullish on TSRA, then I would look for long-biased trades as long as this stock is trending above some near-term support levels at $18.62 to its 200-day at $18.14 and then once it takes out its 50-day at $20.77 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 341,611 shares. If we get that move soon, then TSRA will set up to re-test or possibly take out its 52-week high at $22.59 a share. If that level gets taken out with volume, then TSRA could easily hit $25 a share.
Leucadia National
Another holding company that insiders are loading up on here is Leucadia National (LUK), which invests in beef processing, manufacturing, telecommunications, gaming, real estate, energy, medical product development and winery operations. Insiders are buying this stock into notable strength, since shares are up 12.6% so far in 2013.
Leucadia National has a market cap of $9.7 billion and an enterprise value of $11.2 billion. This stock trades at a cheap valuation, with a trailing price-to-earnings of 8.34. This is not a cash-rich company, since the total cash position on its balance sheet is $18.82 billion and its total debt is $20.20 billion. This stock currently sports a dividend yield of 0.90%.
A director just bought 40,000 shares, or about $1.06 million worth of stock, at $26.55 per share.
From a technical perspective, LUK is currently trending just below its 50-day moving average and just above its 200-day moving average, which is neutral trendwise. This stock has been consolidating for the last month, with shares moving sideways between $27.98 on the upside and $26.38 on the downside. A high-volume move above the upper-end of its recent sideways trading chart pattern could trigger a big breakout trade for shares of LUK.
If you're in the bull camp on LUK, then look for long-biased trades as long as this stock is trending above its 200-day at $26.30 or above more support at $25.61, and then once it breaks out above some near-term overhead resistance levels at $27.42 to $27.98 a share with high volume. Look for a sustained move or close above those levels with volume that registers near or above its three-month average action of 1.34 million shares. If that breakout triggers soon, then LUK will set up to re-test or possibly take out its next major overhead resistance levels at $31.78 to $32.36 a share.
Halcon Resources
One energy player that insiders are active in here is Halcon Resources (HK), which is engaged in the acquisition, development, exploitation, exploration and production of oil and natural gas properties. Insiders are buying this stock into notable weakness, since shares are off by 22% so far in 2013.
Halcon Resources has a market cap of $1.99 billion and an enterprise value of $4.71 billion. This stock trades at a premium valuation, with a trailing price-to-earnings of 112.50 and a forward price-to-earnings of 12.56. Its estimated growth rate for this year is 900%, and for next year it's pegged at 79.2%. This is not a cash-rich company, since the total cash position on its balance sheet is $3.06 million and its total debt is $2.71 billion.
A director just bought 200,000 shares, or about $1.02 million worth of stock, at $5.10 per share. A beneficial owner also just bought 5.2 million shares, or about $26.44 million worth of stock, at $5.10 per share.
From a technical perspective, HK is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has been downtrending badly for the last six months, with shares moving lower from its high of $8.12 to its recent low of $4.92 a share. During that downtrend, shares of HK have been making mostly lower highs and lower lows, which is bearish technical price action. That said, this stock has started to find some buying interest off some previous support areas at $4.92 to $5.10 a share.
If you're bullish on HK, then look for long-biased trades as long as this stock is trending above some key near-term support levels at $5.10 to $4.92 and then once it breaks out back above its 50-day at $5.67 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 volume of 5.14 million shares. If that breakout triggers soon, then HK will set up to re-test or possibly take out its next major overhead resistance levels at $6.11 to $6.54 a share. Any high-volume move above those levels will then give HK a chance to tag $6.75 to $6.84 a share.
Hansen Medical
One health care player that insiders are active in here is Hansen Medical (HNSN), which develops, manufactures and markets new generation of medical robotics for accurate positioning, manipulation and stable control of catheters and catheter-based technologies. Insiders are buying this stock into relative weakness, since shares are off by 19.2% so far in 2013.
Hansen Medical has a market cap of $113 million and an enterprise value of $118 million. This stock trades at a premium valuation, with a price-to-sales of 7.13. Its estimated growth rate for this year is -3%, and for next year it's pegged at 36.2%. This is not a cash-rich company, since the total cash position on its balance sheet is $21.08 million and its total debt is $29.57 million.
A beneficial owner just bought 8.1 million shares, or about $9.96 million worth of stock, at $1.23 per share.
From a technical perspective, HNSN is currently trending above its 50-day and just below is 200-day moving average, which is neutral trendwise. This stock recently spiked up sharply from its low of $1.14 to its recent high of $1.96 a share with big upside volume. Since that move, shares of HNSN have pulled back and started to consolidation between $1.77 and $1.60 a share. This stock is now starting to bounce higher and move within range of triggering a near-term breakout trade.
If you're bullish on HNSN, then look for long-biased trades as long as this stock is trending some key near-term support levels at $1.60 to its 50-day at $1.51, and then once it breaks out above some near-term overhead resistance levels at $1.77 to $1.96 a share 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 530,653 shares. If that breakout hits soon, then HNSN will set up to re-test or possibly take out its next major overhead resistance levels at $2.15 to $2.23 a share. Any high-volume move above those levels will then give HNSN a chance to tag $2.50 to $2.75 a share.
McDermott International
One final stock with some decent insider buying is McDermott International (MDR), an engineering, procurement, construction and installation company engaged on designing and executing complex offshore oil and gas projects. Insiders are buying this stock into big time weakness, since shares are off by 33.3% so far in 2013.
McDermott International has a market cap of $1.74 billion and an enterprise value of $1.35 billion. This stock trades at a reasonable valuation, with a forward price-to-earnings of 13.56. Its estimated growth rate for this year is -140.7%, and for next year it's pegged at 254.3%. This is a cash-rich company, since the total cash position on its balance sheet is $427.71 million and its total debt is $95.64 million.
The CEO just bought 74,180 shares, or about $499,000 worth of stock, at $6.74 per share.
From a technical perspective, MDR is currently trending well below both its 50-day and 200-day moving averages, which is bearish. This stock recently gapped down sharply from $9 to $6.68 with heavy downside volume. Following that move, shares of MDR have started to rebound sharply and trend higher, with the stock making higher lows and higher highs. This move is quickly pushing shares of MDR within range of triggering a near-term breakout trade.
If you're bullish on MDR, then look for long-biased trades as long as this stock is trending above some key near-term support at $7.19 or $6.68 and then once it breaks out above some near-term overhead resistance at $7.74 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 4.48 million shares. If that breakout triggers soon, then MDR will set up to re-fill some of its previous gap down zone that started near $9 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.
MSFT Operating Income Annual data by YCharts The market reacted positively to the announcement of CEO Steve Ballmer stepping down even though operating profits have climbed at a rapid pace since Ballmer took over in 2000. The company has the resources to hire the very best talent, and you can expect another pop higher in shares once the replacement is announced.
Source: Markit
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