DELAFIELD, Wis. (Stockpickr) -- Volatility remains in fashion on Wall Street as stocks reversed Monday's strong action to close sharply lower on Tuesday. With the new quarter officially starting today, investors will be looking to see if large institutional traders come back to the markets and place bullish bets.
Recent crazy swings in the broad averages aside, there is one key signal that I track no matter what the market is doing: insider buying. Nobody knows the state of a company better than its high-ranking executives, and they aren't afraid to make purchases even when the overall market is volatile.
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, 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.
Vince Holdings
One stock that insiders are loading up on here is Vince Holdings (VNCE - Get Report), which designs, merchandises and sells various contemporary fashion brand products in the U.S. and internationally. Insiders are buying this stock into big weakness, since shares have dropped sharply by 39% over the last six months.
Vince Holdings has a market cap of $681 million and an enterprise value of $725 million. This stock trades at a reasonable valuation, with a trailing price-to-earnings of 19.9 and a forward price-to-earnings of 15.5. Its estimated growth rate for this year is 9.6%, and for next year it's pegged at 15.5%. This is not a cash-rich company, since the total cash position on its balance sheet is $112,000 and its total debt is $88 million.
A director just bought 100,000 shares, or about $1.70 million worth of stock, at $17.02 to $17.20 per share. That same director also justbought 189,879 shares, or about $3.23 million worth of stock, at $17.00 to $17.01 per share.
From a technical perspective, VNCE is currently trending well below both its 50-day and 200-day moving averages, which is bearish. This stock has been downtrending badly for the last four months, with shares dropping sharply lower from its high of $37.68 to its new 52-week low of $16.50 a share. During that downtrend, shares of VNCE have been consistently making lower highs and lower lows, which is bearish technical price action. That said, shares of VNCE have now started to bounce higher off that $16.50 low with strong upside volume flows.
If you're bullish on VNCE, then I would look for long-biased trades as long as this stock is trending above Tuesday's intraday low of $17.38 a share or above its 52-week low of $16.50 a share and then once it breaks out above Tuesday's intraday high of $18.60 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 477,767 shares. If that breakout begins soon, then VNCE will set up to re-test or possibly take out its next major overhead resistance levels at $21.84 to its 50-day moving average of $21.99 a share.
Must Read: Warren Buffett's Top 10 Dividend Stocks
J.G. Wentworth
J.G. Wentworth has a market cap of $148 million and an enterprise value of $4.95 billion. This stock trades at a cheap valuation, with trailing price-to-earnings of 4.3 and a forward price-to-earnings of 5. Its estimated growth rate for this year is -52.1%, and for next year it's pegged at 28%. This is not a cash-rich company, since the total cash position on its balance sheet is $41.65 million and its total debt is $4.85 billion.
A beneficial owner just bought 132,859 shares, or above $1.31 million worth of stock, at $9.88 to $9.95 per share.
From a technical perspective, JGW is currently trending above its 50-day moving average and just below its 200-day moving average, which is neutral trendwise. This stock ripped higher on Tuesday back above its 50-day moving average of $10.18 a share with strong upside volume flows. This spike to the upside is now quickly pushing shares of JGW within range of triggering a near-term breakout trade above some key overhead resistance levels.
If you're in the bull camp on JGW, then I would look for long-biased trades as long as this stock is trending above Tuesday's intraday low of $10.47 a share and then once it breaks out above some near-term overhead resistance at $10.75 a share and then once it clears its 200-day moving average of $10.90 a share with high volume that registers near or above its three-month average action of 91,926 shares. If that breakout materializes soon, then JGW will set up to re-test or possibly take out its next major overhead resistance levels at $11.41 to $11.74 a share, or even $12.50 to $13 a share.
Must Read: 10 Stocks George Soros Is Buying
Jabil Circuit
One technology stock that insiders are active in here is Jabil Circuit (JBL - Get Report), which provides electronic manufacturing services and solutions worldwide. Insiders are buying this stock into decent strength, since shares have trended higher by 18.2% over the last six months.
From a technical perspective, JBL 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 moving higher from its low of $17.90 to its recent high of $23.78 a share. During that uptrend, shares of JBL have been consistently making higher lows and higher highs, which is bullish technical price action.
If you're bullish on JBL, then I would look for long-biased trades as long as this stock is trending above some key near-term support levels at $22.40 to its 50-day moving average of $21.88 a share and then once it breaks out above its 52-week high of $23.78 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 1.81 million shares. If that breakout develops soon, then JBL will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that move are $28 to $30 a share.
Must Read: 10 Stocks Carl Icahn Is Buying
Global Partners
Another stock that insiders are in love with here is Global Partners (GLP - Get Report), which distributes gasoline, distillates, residual oil, renewable fuels, crude oil, natural gas and propane to wholesalers, retailers, and commercial customers in the New England states and New York. Insiders are buying this stock into notable weakness, since shares have dropped by 16.1% over the six months.
Global Partners LP has a market cap of $1 billion and an enterprise value of $1.6 billion. This stock trades at a fair valuation, with a trailing price-to-earnings of 8.8 and a forward price-to-earnings of 15. Its estimated growth rate for this year is -45.6%, and for next year it's pegged at 7.4%. This is not a cash-rich company, since the total cash position on its balance sheet is $5.24 million and its total debt is $609.33 million. This stock currently sports a dividend yield of 7.1%.
A beneficial owner just bought 44,800 shares, or about $1.69 million worth of stock, at $37.57 to $38.07 per share.
From a technical perspective, GLP is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has been downtrending over the last few weeks, with shares sliding lower from its high of $38.46 to its recent low of $34.29 a share. During that move, shares of GLP have been making mostly lower highs and lower lows, which is bearish technical price action. That said, off that pullback shares of GLP have so far held above some near-term support levels at $34.29 to $33.58 a share.
If you're bullish on GLP, then I would look for long-biased trades as long as this stock is trending above some near-term support levels at $34.29 to $33.58 a share and then once it breaks out above both its 50-day at $37.48 a share to its 200-day at $38.46 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 of 97,997 shares. If that breakout begins soon, then GLP will set up to re-test or possibly take out its next major overhead resistance levels at $40.37 to $42 a share.
Must Read: 5 Stocks Warren Buffett Is Selling
Civeo
One final stock with some interesting insider activity is Civeo (CVEO), which provides remote site accommodations for the natural resource industry in Australia, Canada and the U.S. Insiders are buying this stock into monster weakness, since shares have plunged by 79.7% over the last six months.
Civeo has a market cap of $272 .7 million and an enterprise value of $786 million. This stock trades at a fair valuation, with a price-to-sales of 0.29 and a price-to-book of 0.31. Its estimated growth rate for this year is -130%, and for next year it's pegged at -31.4%. This is not a cash-rich company, since the total cash position on its balance sheet is $263.31 million and its total debt is $775 million.
A director just bought 91,600 shares, or about $218,000 worth of stock, at $2.39 per share. From a technical perspective, CVEO 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 month, with shares moving lower from its high of $4.06 to its new 52-week low of $2.25 a share. During that downtrend, shares of CVEO have been making mostly lower highs and lower lows, which is bearish technical price action. That said, shares of CVEO have started to rebound modestly off that $2.25 low and it's now moving within range of triggering a near-term breakout trade.
If you're bullish on CVEO, then I would look for long-biased trades as long as this stock is trending above some key near-term support levels at $2.45 or above its 52-week low of $2.25 a share and then once it breaks out above some near-term overhead resistance at $2.78 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 2.89 million shares. If that breakout gets set off soon, then CVEO will set up to re-test or possibly take out its next major overhead resistance levels at its 50-day moving average of $3.25 a share to around $3.50 a share.
Must Read: Warren Buffett's Top 10 Stock Buys
By Roberto Pedone
No comments:
Post a Comment