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.
Must Read: Warren Buffett's Top 10 Dividend Stocks
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.
Kinder Morgan
One oil and gas pipeline player that insiders are loading up on here is Kinder Morgan (KMI - Get Report), which operates as an energy infrastructure and energy company in North America. Insiders are buying this stock into slight weakness, since shares have dropped just 1% over the last six months.
Kinder Morgan has a market cap of $87.2 billion and an enterprise value of $133.4 billion. This stock trades at a premium valuation, with a trailing price-to-earnings of 49.4 and a forward price-to-earnings of 42.3. Its estimated growth rate for this year is -22.4%, and for next year it's pegged at 14.5%. This is not a cash-rich company, since the total cash position on its balance sheet is $430 million and its total debt is $45.26 billion. This stock currently sports a dividend yield of 4.7%.
From a technical perspective, Kinder Morgan is currently trending above its 200-day moving average and below its 50-day moving average, which is neutral trendwise. This stock has been downtrending badly over the last two months, with shares moving lower from its high of $44.22 to its recent low of $39.77 a share. During that downtrend, shares of Kinder Morgan have been consistently making lower highs and lower lows, which is bearish technical price action.
If you're bullish on Kinder Morgan, then I would look for long-biased trades as long as this stock is trending above its 200-day moving average of $39.96 or above more near-term support at $39.77 and then once it breaks out above some near-term overhead resistance at $41 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 8.09 million shares. If that breakout gets underway soon, then shares of Kinder Morgan will set up to re-test or possibly take out its next major overhead resistance levels at its 50-day moving average of $42.30 to $43 a share, or even its 52-week high of $44.71 a share.
Feeport-McMoRan
Another natural resource player that insiders are in love with here is Freeport-McMoRan (FCX - Get Report), which engages in the acquisition of mineral assets, and oil and natural gas resources. Insiders are buying this stock into notable weakness, since shares have fallen by 20% over the last six months.
Freeport-McMoRan has a market cap of $20.8 billion and an enterprise value of 44.7 billion. This stock trades at a cheap valuation, with a forward price-to-earnings of 9.1. Its estimated growth rate for this year is -70.4%, and for next year it's pegged at 277.6%. This is not a cash-rich company, since the total cash position on its balance sheet is $549 million and its total debt is $20.31 billion. This stock currently sports a dividend yield of 1%.
A director just bought 60,000 shares, or about $1.23 million worth of stock, at $20.42 to $20.56 per share.
From a technical perspective, Freeport is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has recently started to bounce higher off some near-term support at $19.26 a share. That bounce is starting to push shares of Freeport-McMoRan within range of triggering a near-term breakout trade above some key overhead resistance levels.
If you're in the bull camp on Freeport, then I would look for long-biased trades as long as this stock is trending above some near-term support at $19.26 and then once it breaks out above some near-term overhead resistance levels at $20.68 to its 50-day moving average of $20.82 a share with volume that hits near or above its three-month average action of 18.40 million shares. If that breakout develops soon, then this stock will set up to re-test or possibly take out its next major overhead resistance levels at $22 to $23 a share, or even $24 to $25 a share.
Must Read: Warren Buffett's Top 10 Stock Buys
Jakks Pacific
One toy and games player that insiders are active in here is Jakks Pacific (JAKK - Get Report), which designs, develops, produces, and markets consumer products in the U.S. and internationally. Insiders are buying this stock into big strength, since shares have ripped higher by 29% over the last three months.
A beneficial owner just bought 120,459 shares, or about $880,000 worth of stock, at $7.17 to $7.49 per share.
From a technical perspective, Jakks Pacific 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 five months, with shares moving higher from its low of $5.70 to its recent high of $8.42 a share. During that move, shares of Jakks Pacific have been making mostly higher lows and higher highs, which is bullish technical price action. That trend has now started to push this stock within range of triggering a big breakout trade.
If you're bullish on Jakks Pacific, then I would look for long-biased trades as long as this stock is trending above some near-term support levels at $8 or at $7.50 and then once it breaks out above some key overhead resistance levels at $8.99 to $9.50 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 542,631 shares. If that breakout triggers soon, then this stock will set up to re-test or possibly take out its next major overhead resistance levels at $11.75 to $12 a share, or even $14 a share.
Must Read: 5 Stocks Under $10 Set to Soar Higher
Orthofix
One medical device player that insiders are jumping into here is Orthofix (OFIX - Get Report), which provides reconstructive and regenerative orthopedic and spine solutions to physicians. Insiders are buying this stock into decent strength, since shares have moved to the upside by 10.7% over the last six months.
Orthofix has a market cap of $634 million and an enterprise value of $591 million. This stock trades at a reasonable valuation, with a forward price-to-earnings of 42.2. Its estimated growth rate for this year is -12.7%, and for next year it's pegged at 66.7%. This is a cash-rich company, since the total cash position on its balance sheet is $29.78 million and its total debt is zero.
A director just bought 50,000 shares, or about $1.63 million worth of stock, at $32.50 to $32.61 per share.
From a technical perspective, Orthofix 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 uptrending over the last month, with shares moving higher from its low of $31.20 to its recent high of $34.70 a share. During that uptrend, shares of Orthofix have been making mostly higher lows and higher highs, which is bullish technical price action. That move has now pushed this stock within range of triggering a near-term breakout trade.
If you're bullish on Orthofix, then I would look for long-biased trades as long as this stock is trending above some near-term support at $33 or above more support at $32.34 and then once it breaks out above its 50-day moving average of $34.55 to more resistance at $34.70 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 117,458 shares. If that breakout hits soon, then this stock will set up to re-test or possibly take out its next major overhead resistance levels at $37 to its 52-week high of $38.94 a share. Any high-volume move above $38.94 will then give this stock a chance to tag or trend north of $40 a share.
Must Read: 5 Stocks Set to Soar on Bullish Earnings
Kratos Defense & Security Solutions
Kratos Defense & Security Solutions has a market cap of $364 million and an enterprise value of $973 million. This stock trades at a reasonable valuation, with a forward price-to-earnings of 23. Its estimated growth rate for this year is -6.2%, and for next year it's pegged at 80%. This is not a cash-rich company, since the total cash position on its balance sheet is $34.40 million and its total debt is $663 million.
A director just bought 150,000 shares, or about $900,000 worth of stock, at $6.03 per share. From a technical perspective, Kratos Defense & Security Solutions 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 month, with shares moving higher from its low of $4.80 to its recent high of $6.45 a share. During that uptrend, this stock has been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of Kratos Defense & Security Solutions within range of triggering a near-term breakout trade.
If you're bullish on Kratos Defense & Security Solutions, then I would look for long-biased trades as long as this stock is trending above its 50-day moving average of $5.70 and then once it breaks out above some near-term overhead resistance at $6.45 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 382,925 shares. If that breakout triggers soon, then this stock will set up to re-test or possibly take out its next major overhead resistance levels at $7.07 to $7.50 a share, or even $8 to $8.50 a share.
By Roberto Pedone
No comments:
Post a Comment