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, 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.
Macerich
One real estate investment trust player that insiders are loading up on a massive amount of stock in here is Macerich (MAC - Get Report), which primarily engages in acquisition, ownership, development, redevelopment, management and leasing of regional and community shopping centers located throughout the U.S. Insiders are buying this stock into notable strength, since shares have moved to the upside by 10.9% over the last six months.
Macerich has a market cap of $13 billion and an enterprise value of $19.3 billion. This stock trades at a fair valuation, with a trailing price-to-earnings of 8 and a forward price-to-earnings of 19.7. Its estimated growth rate for this year is 8.5%, and for next year it's pegged at 8.3%. This is not a cash-rich company, since the total cash position on its balance sheet is $118.16 million and its total debt is $6.47 billion. This stock currently sports a dividend yield of 3.2%.
A director just bought 1,186,000 shares, or about $98.69 million worth of stock, at $83.05 per share.
From a technical perspective, MAC is currently trending above its 200-day moving averages and just below its 50-day moving average, which is neutral trendwise. This stock has been uptrending over the last two months, with shares moving higher from its low of $76.65 to its recent high of $85.62 a share. During that uptrend, shares of MAC have been making mostly higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of MAC within range of triggering a near-term breakout trade.
If you're bullish on MAC, then I would look for long-biased trades as long as this stock is trending above some near-term support at $79.83 a share and then once it breaks out above some near-term overhead resistance levels at its 50-day moving average of $82.87 a share and then above more resistance at $84.35 to $85.62 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 volume of 2.15 million shares. If that breakout triggers soon, then MAC will set up to re-test or possibly take out its next major overhead resistance levels at $88 to $89 a share, or even $90 to $94 a share.
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Virgin America
Another stock that insiders are in love with here is Virgin America (VA), which provides scheduled air travel services. Insiders are buying this stock into notable weakness, since shares have traded to the downside by 18.2% over the last six months.
A director just bought 70,500 shares, or about $1.98 million worth of stock, at $27.94 to $28.06 per share.
From a technical perspective, VA is currently trending below its 50-day moving average, which is bearish. This stock has been downtrending badly over the last five months, with shares dropping from its high of $44 a share to its recent low of $27.19 a share. During that downtrend, shares of VA have been consistently making lower highs and lower lows, which is bearish technical price action. That said, shares of VA have started to bounce off that $27.19 low and it's beginning to move within range of triggering a near-term breakout trade.
If you're in the bull camp on VA, then I would look for long-biased trades as long as this stock is trending above that recent low of $27.19 a share and then once it breaks out above its 50-day moving average of $29.79 a share and then above more near-term resistance at $29.88 a share with volume that hits near or above its three-month average action of 1.04 million shares. If that breakout develops soon, then VA will set up to re-test or possibly take out its next major overhead resistance levels at $31 to $32.38 a share, or even $34 to $35 a share.
Must Read: 5 Stocks Warren Buffett Is Selling
Keurig Green Mountain
One consumer goods player that insiders are active in here is Keurig Green Mountain (GMCR - Get Report), which produces and sells specialty coffee, coffeemakers, teas and other beverages in the U.S. and Canada. Insiders are buying this stock into massive weakness, since shares have plunged by 37.5% over the last six months.
From a technical perspective, GMCR is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has been downtrending badly over the last three months, with shares plunging lower from its high of $130.76 a share to its recent low of $88.01 a share. During that downtrend, shares of GMCR have been consistently making lower highs and lower lows, which is bearish technical price action.
If you're bullish on GMCR, then I would look for long-biased trades as long as this stock is trending above that recent low of $88.01 a share and then once it breaks out above some near-term resistance at $91.54 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 2.05 million shares. If that breakout materializes soon, then GMCR will set up to re-test or possibly take out its next major overhead resistance levels at $95 to $97 a share. Any high-volume move above $97.50 will then give GMCR a chance to re-fill some of its previous gap-down-day zone from earlier this month that started at $104.81 a share.
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Caesars Entertainment
One resorts and casinos player that insiders are jumping into here is Caesars Entertainment (CZR - Get Report), which provides casino-entertainment and hospitality services in the U.S. and internationally. Insiders are buying this stock into major weakness, since shares have collapsed by 42.5% over the last six months.
From a technical perspective, CZR is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has been consolidating and trending sideways for the last few weeks, with shares moving between $9.84 a share on the downside and $10.92 a share on the upside. Any high-volume move above the upper-end of its recent sideways trading chart pattern could trigger a big breakout trade for shares of CZR.
If you're bullish on CZR, then I would look for long-biased trades as long as this stock is trending above some near-term support at $9.84 or above more support at $9.17 and then once it breaks out above its 50-day moving average of $10.19 a share and then above more resistance levels at $10.55 to $10.92 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 826,043 shares. If that breakout gets started soon, then CZR will set up to re-test or possibly take out its next major overhead resistance levels at its 200-day moving average of $12.05 a share to $12.50 a share.
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West Pharmaceuticals Services
West Pharmaceuticals Services has a market cap of $3.9 billion and an enterprise value of $4 billion. This stock trades at a reasonable valuation, with a trailing price-to-earnings of 30.5 and a forward price-to-earnings of 24.8. Its estimated growth rate for this year is 1.1%, and for next year it's pegged at 23.9%. This is not a cash-rich company, since the total cash position on its balance sheet is $207.10 million and its total debt is $333.90 million.
The CEO just bought 18,300 shares, or about $1 million worth of stock, at $54.89 per share. From a technical perspective, WST 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 a bit over the last month, with shares moving higher from its low of $52.73 to its recent high of $55.84 a share. During that uptrend, shares of WST have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of WST within range of triggering a near-term breakout trade.
If you're bullish on WST, then I would look for long-biased trades as long as this stock is trending above some near-term support levels at $54 to $53 a share or even $52.73 a share and then once it breaks out above its 50-day moving average of $55.80 a share to more resistance at $55.84 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 310,097 shares. If that breakout kicks off soon, then WST will set up to re-test or possibly take out its next major overhead resistance levels at $57.64 to its 52-week high of $60.30 a share.
By Roberto Pedone
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