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.
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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, it's 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 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.
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Darden Restaurants
One restaurant stock that insiders are active in here is Darden Restaurants (DRI - Get Report), which owns and operates full service restaurants in the U.S. and Canada. Insiders are buying this stock into major strength, since shares have ripped higher by 41% over the last six months.
From a technical perspective, DRI is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending strong over the last six months, with shares soaring higher from its low of $45.87 to its recent high of $69.80 a share. During that uptrend, shares of DRI have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of DRI within range of triggering a near-term breakout trade.
If you're bullish on DRI, then I would look for long-biased trades as long as this stock is trending above some key near-term support levels at $65.46 or above its 50-day at $64.04 a share and then once it breaks out above some near-term overhead resistance levels at $69.43 to $69.80 a share and then above its 52-week high of $70.38 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 1.48 million shares. If that breakout hits soon, then DRI will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that move are $75 to $80 a share.
State Auto Financial
A financial stock that insiders are in love with here is State Auto Financial (STFC - Get Report), which engages in writing personal, business and specialty insurance products. Insiders are buying this stock into strength, since shares have trended to the upside by 17.6% over the last three months.
State Auto Financial has a market cap of $1.02 billion and an enterprise value of $1.03 billion. This stock trades at a fair valuation, with a trialing price-to-earnings of 9.6 and a forward price-to-earnings of 13.7. Its estimated growth rate for this year is -21.4%, and for next year it's pegged at 9.7%. This is not a cash-rich company, since the total cash position on its balance sheet is $86.30 million and its total debt is $100.80 million.
A beneficial owner just bought 12,723 shares, or about $320,000 worth of stock, at $25.05 per share. That same beneficial owner justbought 5,145 shares, or about $128,000 worth of stock, at $24.98 per share.
From a technical perspective, STFC is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending strong over the last five months, with shares moving higher from its low of $19.19 to its recent high of $25.70 a share. During that move, shares of STFC have been making mostly higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of STFC within range of triggering a near-term breakout trade.
If you're in the bull camp on STFC, then I would look for long-biased trades as long as this stock is trending above its 50-day moving average of $23.72 a share and then once it breaks out above its 52-week high of $25.70 a share with volume that hits near or above its three-month average action of 19,943 shares. If that breakout triggers soon, then STFC will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that breakout are $30 to $33 a share.
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EV Energy Partners
One oil and gas drilling player that insiders are loading up on here is EV Energy Partners (EVEP - Get Report), which engages in the acquisition, development and production of oil and natural gas properties in the U.S. Insiders are buying this stock into major weakness, since shares have dropped sharply by 49% over the six months.
EV Energy Partners has a market cap of $728 million and an enterprise value of $1.7 billion. This stock trades at a premium valuation, with a trailing price-to-earnings of 5.7 and a forward price-to-earnings of 213. Its estimated growth rate for this year is 7.2%, and for next year it's pegged at -90.5%. This is not a cash-rich company, since the total cash position on its balance sheet is $8.26 million and its total debt is $1.03 billion. This stock currently sports a dividend yield of 14.3%.
A beneficial owner just bought 300,000 shares, or about $4.27 million worth of stock, at $14.25 per share.
From a technical perspective, EVEP is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has been uptrending a bit over the last few weeks, with shares moving higher from its low of $12.14 to its intraday high of $15.25 a share. During that uptrend, shares of EVEP have been making mostly higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of EVEP within range of triggering a near-term breakout trade.
If you're bullish on EVEP, then I would look for long-biased trades as long as this stock is trending above some near-term support at $14 a share and then once it breaks out above some near-term overhead resistance levels at $15.66 to $16.78 a share with high volume. Look for a sustained move or close above the levels with volume that registers near or above its three-month average action of 621,028 shares. If that breakout begins soon, then EVEP will set u to re-test or possibly take out its next major overhead resistance levels at $17.94 to $20.02 a share, or even $20.73 a share.
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Luby's
Another stock that insiders are making moves in here is Luby's (LUB - Get Report), which operates a multi-branded company in the restaurant industry and in the contract food services industry. Insiders are buying this stock into notable strength, since shares have spiked higher by 12.9% over the last three months.
From a technical perspective, LUB is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending over the last few weeks, with shares moving higher from its low of $4.78 to its recent high of $5.52 a share. During that uptrend, shares of LUB have been making mostly higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of LUB within range of triggering a major breakout trade above some key near-term overhead resistance levels.
If you're bullish on LUB, then I would look for long-biased trades as long as this stock is trending above some key near-term support at $5.20 a share or above its 200-day moving average of $5.10 a share and then once it breaks out above some key near-term overhead resistance levels at $5.57 to $5.72 a share and then above $5.93 to $6.01 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 action 47,872 of shares. If that breakout kicks off soon, then LUB will set up to re-test or possibly take out its next major overhead resistance levels at $7 to $8 a share.
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Agco
One final stock with some bullish insider activity is Agco (AGCO - Get Report), which manufactures and distributes agricultural equipment and related replacement parts worldwide. Insiders are buying this stock into decent strength, since shares have moved higher by 8.4% over the last six months.
AGCO has a market cap of $4.1 billion and an enterprise value of $4.9 billion. This stock trades at a fair valuation, with a trailing price-to-earnings of 10.8 and a forward price-to-earnings of 15.7. Its estimated growth rate for this year is -37.9%, and for next year it's pegged at 3.1%. This is not a cash-rich company, since the total cash position on its balance sheet is $363.70 million and its total debt is $1.09 billion. This stock currently sports a dividend yield of 1%.
A director just bought 42,283 shares, or about $1.99 million worth of stock, at $47.28 per share. That same director also just bought 41,253 shares, or about $1.94 million worth of stock, at $47.23 per share.
From a technical perspective, AGCO 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 moving sideways for the last month and change, with shares moving between $46.18 on the downside and $48.38 on the upside. Any high-volume move above the upper-end of its recent range could trigger a big breakout trade for shares of AGCO.
From a technical perspective, AGCO 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 moving sideways for the last month and change, with shares moving between $46.18 on the downside and $48.38 on the upside. Any high-volume move above the upper-end of its recent range could trigger a big breakout trade for shares of AGCO.
If you're bullish on AGCO, then I would look for long-biased trades as long as this stock is trending above its 200-day moving average of $46.86 or above more near-term support at $46.18 and then once it breaks out above some near-term overhead resistance levels at $47.96 a share and then $48.43 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 1.10 million shares. If that breakout develops soon, then AGCO will set up to re-test or possibly take out its next major overhead resistance levels at $50 to $50.95 a share, or even $52 to $54 a share
By Roberto Pedone
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