DELAFIELD, Wis. (Stockpickr) -- Corporate insiders sell their own companies' stock for a number of reasons.
>>Beat the S&P With These 5 Shareholder Yield Champs
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.
>>5 Stocks Set to Soar on Bullish Earnings
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.
>>5 Stocks Under $10 in Breakout Territory
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 five stocks whose insiders have been doing some big buying per SEC filings.
Clean Energy Fuels
One energy player that insiders are snapping up a big amount of stock in here is Clean Energy Fuels (CLNE), which is engaged in the business of selling natural gas fueling solutions to its customers mainly in the U.S. and Canada. Insiders are buying this stock into modest strength, since shares are up 6.1% so far in 2013.
Clean Energy Fuels has a market cap of $1.18 billion and an enterprise value of $1.35 billion. This stock trades at a reasonable valuation, with a price-to-sales of 3.15 and a price-to-book of 2.11. Its estimated growth rate for this year is 46.7%, and for next year it's pegged at -27.5%. This is not a cash-rich company, since the total cash position on its balance sheet is $148.26 million and its total debt is $368.13 million.
>>5 Stocks Ready for Breakouts
The CEO just bought 127,000 shares, or about $1.61 million worth of stock, at $12.69 per share.
From a technical perspective, CLNE is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has just started to trend back above both of those key moving averages with decent upside volume flows. That move is quickly pushing shares of CLNE within range of triggering a near-term breakout trade.
If you're bullish on CLNE, then I would look for long-biased trades as long as this stock is trending above its 50-day at $12.79 or above more support at $12.20, and then once it breaks out above some near-term overhead resistance at $13.58 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 942,047 shares. If that breakout hits soon, then CLNE will set up to re-test or possibly take out its next major overhead resistance levels at $14.48 to its 52-week high at $14.82 a share. Any high-volume move above those levels will then give CLNE a chance to tag $17 to $18.
Home Depot
Another home improvement retailer that insiders are active in here is Home Depot (HD), which sells an assortment of building materials, home improvement and lawn and garden products and provides a number of services. Insiders are buying this stock into decent strength, since shares are up 22% so far in 2013.
>>5 Rocket Stocks to Buy as Mr. Market Climbs
Home Depot has a market cap of $108 billion and an enterprise value of $116 billion. This stock trades at a reasonable valuation, with a trailing price-to-earnings of 22.52 and a forward price-to-earnings of 17.41. Its estimated growth rate for this year is 19%, and for next year it's pegged at 18.4%. This is not a cash-rich company, since the total cash position on its balance sheet is $3.42 billion and its total debt is $12.76 billion. This stock currently sports a dividend yield of 2.1%.
A director just bought 100,000 shares, or $752,000 worth of stock, at $75.20 per share.
From a technical perspective, HD is currently trending above its 200-day moving average and just below its 50-day moving average, which is neutral trendwise. This stock recently formed a double bottom chart pattern after it found support just above its June low of $72.03 a share after the stock hit $72.21 a share this move. Shares of HD have started to rebound higher off that $72.21 low and it's now moving within range of triggering a near-term breakout trade.
If you're in the bull camp on HD, then look for long-biased trades as long as this stock is trending above some near-term support levels at $74 or at $73, and then once it breaks out above its 50-day at $76.85 a share with high volume. Look for a sustained move or close above that level with volume that registers near or above its three-month average action of 7.25 million shares. If that breakout triggers soon, then HD will set up to re-test or possibly take out its next major overhead resistance levels at $80 to its 52-week high at $81.56 a share.
Illinois Tool Works
One industrial conglomerate that insiders are jumping into here is Illinois Tool Works (ITW), which is a manufacturer of a range of industrial products & equipment. Insiders are buying this stock into solid strength, since shares are up 23% so far in 2013.
Illinois Tool Works has a market cap of $33 billion and an enterprise value of $35 billion. This stock trades at a reasonable valuation, with a trailing price-to-earnings of 14.9 and a forward price-to-earnings of 16.2. Its estimated growth rate for this year is 3.7%, and for next year it's pegged at 10%. This is not a cash-rich company, since the total cash position on its balance sheet is $2.77 billion and its total debt is a $5.07 billion. This stock currently sports a dividend yield of 2.3%.
>>5 Hated Earnings Stocks You Should Love
The CFO just bought 7,000 shares, or about $519,000 worth of stock, at $74.25 per share.
From a technical perspective, ITW is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending strong for the last six months, with shares soaring higher from its low of $59.68 to its intraday high of $75.63 a share. During that move, shares of ITW have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of ITW within range of triggering a major breakout trade.
If you're bullish on ITW, then look for long-biased trades as long as this stock is trending above its 50-day at $72.86 or above more support at $71.07, and then once it breaks out above its new 52-week high at $75.63 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 1.72 million shares. If that breakout triggers soon, then ITW will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that move are $80 to $85 a share.
Digital Realty Trust
One real estate investment trust player that insiders are in love with here is Digital Realty Trust (DLR), which is engaged in the business of owning, acquiring, developing, redeveloping and managing technology-related real estate. Insiders are buying this stock into weakness, since shares are off by 19% so far in 2013.
Digital Realty Trust has a market cap of $7 billion and an enterprise value of $12 billion. This stock trades at a reasonable valuation, with trailing price-to-earnings of 38.19 and a forward price-to-earnings of 10.43. Its estimated growth rate for this year is 8.4%, and for next year it's pegged at 9.2%. This is not a cash-rich company, since the total cash position on its balance sheet is $24.26 million and its total debt is $4.7 billion. This stock currently sports a dividend yield of 5.7%.
>>5 REITs to Call Bernanke's Bluff
The CFO just bought 10,000 shares, or about $529,000 worth of stock, at $52.94 per share.
From a technical perspective, DLR is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock recently formed a double bottom chart pattern at $50.23 to $50.26 a share. Following that bottom, shares of DLR have started to spike notably higher and it's quickly moving within range of triggering a big breakout trade.
If you're bullish on DLR, then look for long-biased trades as long as this stock is trending some key near-term support at $52 or at $50.23, and then once it breaks out above some near-term support levels at $55.44 to $55.65 a share to its 50-day at $55.94 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 1.65 million shares. If that breakout hits soon, then DLR will set up to re-test or possibly take out its next major overhead resistance levels at its 200-day at $62.15 a share to more resistance at $64.47 a share.
Energy Transfer Partners
One final name with some big insider buying is Energy Transfer Partners (ETP), which is a publicly traded partnership owning and operating a portfolio of energy assets. Insiders are buying this stock into notable strength, since shares are up 16% so far in 2013.
>>5 Stocks Rising on Big Volume
Energy Transfer Partners has a market cap of $18 billion and an enterprise value of $35 billion. This stock trades at a premium valuation, with a trailing price-to-earnings of 32.30 and a forward price-to-earnings of 20.44. Its estimated growth rate for this year is -45.4%, and for next year it's pegged at 1.7%. This is not a cash-rich company, since the total cash position on its balance sheet is $532 million and its total debt is a whopping $17.41 billion. This stock currently sports a dividend yield of 7%.
A director bought 20,000 shares, or about $1.03 million worth of stock, at $51.82 per share.
From a technical perspective, ETP is currently trending above its 200-day moving average and just below its 50-day moving average, which is neutral trendwise. This stock has been downtrending over the last month and change, with shares falling from its high of $54.85 a share to its recent low of $50 a share. During that move, shares of ETP have been making mostly lower highs and lower lows, which is bearish technical price action.
If you're bullish on ETP, then look for long-biased trades as long as this stock is trending above some key near-term support levels at $50 or at $49.40, and then once it breaks out back above its 50-day at $51.36 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 1.77 million shares. If that breakout hits soon, then ETP will set up to re-test or possibly take out its next major overhead resistance levels at $53 to its 52-week high at $54.85 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:
>>Why Wall Street Got Apple Wrong
>>5 Stocks Under $10 Making Big Moves
>>4 Stocks Within Range of Breakouts
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.
No comments:
Post a Comment