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 diversificationpurposes, which allows them to sell stock in stages instead of selling all at one price.
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.
General Electric
One diversified machinery player that insiders are jumping into here is General Electric (GE - Get Report) , which operates as an infrastructure and financial services company worldwide. Insiders are buying this stock into modest weakness, since shares have fallen by just 4.2% over the last three months.
General Electric has a market cap of $267 billion and an enterprise value of $463 billion. This stock trades at a reasonable valuation, with a forward price-to-earnings of 15.9. Its estimated growth rate for this year is 14.5%, and for next year it's pegged at 18%. This is not a cash-rich company, since the total cash position on its balance sheet is $10.50 billion and its total debt is $198.30 billion. This stock currently sports a dividend yield of 3.2%.
A vice president just bought 66,272 shares, or about $1.83 million worth of stock, at $28.04 per share.
From a technical perspective, General Electric is currently trending below its 50-day moving average and above its 200-day moving average, which is neutral trendwise. This stock has been downtrending a bit over the last month or so, with shares falling off its high of $31.49 to its recent low of $27.48 a share. During that downtrend, shares of General Electric have been making mostly lower highs and lower lows, which is bearish technical price action. That said, this stock has so far held above its 200-day moving average at $27.25 a share during this recent drop.
If you're bullish on General Electric, then I would look for long-biased trades as long as this stock is trending above its 200-day moving average of $27.25 a share and then once it breaks out above some near-term overhead resistance levels at $29 to $29.25 a share and then above both its 20-day moving average of $29.31 and its 50-day moving average of $29.86 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 91.34 million shares. If that breakout fires off soon, then this stock will set up to re-test or possibly take out its next major overhead resistance levels at $31 to its 52-week high of $31.49 a share. Any high-volume move above those levels will then give this stock a chance at making a run at $35 a share.
Legg Mason
Another stock that insiders are active in here is Legg Mason (LM - Get Report) , which provides investment management and related services to institutional and individual clients, company-sponsored investment funds and retail separately managed account programs. Insiders are buying this stock into large weakness, since shares have fallen sharply by 37.4% over the last six months.
The CEO just bought 25,000 shares, or about $745,000 worth of stock, at $29.92 per share. The CFO also just bought 20,000 shares, or about $598,000 worth of stock, at $29.81 per share.
From a technical perspective, Legg Mason is currently trending well 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 falling sharply lower off its high of $46.18 to its new 52-week low of $29.40 a share. During that downtrend, shares of Legg Mason have been consistently making lower highs and lower lows, which is bearish technical price action.
If you're in the bull camp on Legg Mason, then I would look for long-biased trades as long as this stock is trending above its new 52-week low of $29.40 a share and then once it breaks out above some near-term overhead resistance at $30 a share with volume that hits near or above its three-month average action of 1.31 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 $32 to $33.22, or even its 20-day moving average of $34.97 to $36 a share.
BioCryst Pharmaceuticals
One biotechnology player that insiders are loading up on here is BioCryst Pharmaceuticals (BCRX - Get Report) , which designs, optimizes and develops small molecule drugs that block key enzymes involved in the pathogenesis of diseases. Insiders are buying this stock into massive weakness, since shares have plunged by 51.7% over the last six months.
A beneficial owner just bought 106,800 shares, or about $777,000 worth of stock, at $7.00 per share. That same beneficial owner also just bought 344,895 shares, or about $2.51 million worth of stock, at $6.87 to $6.94per share.
From a technical perspective, BioCryst Pharmaceuticals is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has been downtrending over the last two months, with shares dropping off its recent high of $10.98 to its new 52-week low of $6.54 a share. During that downtrend, shares of BioCryst Pharmaceuticals have been making mostly lower highs and lower lows, which is bearish technical price action. That said, this stock has now started to consolidate in a tight range between $6.54 and $around $8 a share. This consolidation pattern could be signaling that the downtrend is over at least in the short-term.
If you're bullish on BioCryst Pharmaceuticals, then I would look for long-biased trades as long as this stock is trending above its new 52-week low of $6.54 a share then once it breaks out above some near-term overhead resistance levels at $7.81 to just above $8 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 717,214 shares. If that breakout gets set off soon, then this stock will set up to re-test or possibly take out its next major overhead resistance levels at its 20-day moving average of $8.56 to its 50-day moving average of $9.52 a share.
Wynn Resorts
One gaming player that insiders are in love with here is Wynn Resorts (WYNN - Get Report) , which develops, owns and operates destination casino resorts. Insiders are buying this stock into big weakness, since shares have dropped sharply by 38% over the last six months.
Wynn Resorts has a market cap of $6.4 billion and an enterprise value of $13.1 billion. This stock trades at a fair valuation, with a trailing price-to-earnings of 33 and a forward price-to-earnings of 20. Its estimated growth rate for this year is -59.4%, and for next year it's pegged at 2.6%. This is not a cash-rich company, since the total cash position on its balance sheet is $2.03 billion and its total debt is $8.75 billion. This stock currently sports a dividend yield of 3.3%.
The CEO just bought 572,850 shares, or about $31.86 million worth of stock, at $53.21 to $59.19 per share.
From a technical perspective, Wynn Resorts is currently trending a bit above its 50-day moving average and well below its 200-day moving average, which is neutral trendwise. This stock has been uptrending over the last few weeks, with shares moving higher off its low of $49.95 to its recent high of $63.75 a share. During that uptrend, shares of Wynn Resorts 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 Wynn Resorts, then I would look for long-biased trades as long as this stock is trending above Tuesday's intraday low of $59.66 a share and then once it breaks out above some near-term overhead resistance levels at $63.75 to $65 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 4.21 million shares. If that breakout kicks off soon, then this stock will set up to re-test or possibly take out its next major overhead resistance levels at around $70 to $72.64, or even $73 to $75 a share.
Archrock
One final stock with some big insider buying is energy player Archrock (AROC - Get Report) , which provides natural gas contract compression services to customers in the oil and natural gas industry in the U.S. Insiders are buying this stock into massive weakness, since shares have collapsed by 79.4% over the last six months.
Archrock has a market cap of $352 million and an enterprise value of $2.4 billion. This stock trades at a premium valuation, with a trailing price-to-earnings of 8 and a forward price-to-earnings of 31.6. Its estimated growth rate for this year is -59.4%, and for next year it's pegged at -42.9%. This is not a cash-rich company, since the total cash position on its balance sheet is $32.52 million and its total debt is $2.09 billion. This stock currently sports a dividend yield of 10.5%.
A beneficial owner just bought 568,041 shares, or about $3.15 million worth of stock at $5.41 to $5.66 per share. From a technical perspective, Archrock is currently trending well below both its 50-day and 200-day moving averages, which is bearish. This stock has been downtrending badly over the last four months, with shares moving sharply lower off its high of $14.53 to its new 52-week low of $4.10 a share. During that downtrend, shares of Archrock have been consistently making lower highs and lower lows, which is bearish technical price action. That said, this stock has now started to rebound off that $4.10 low, and it's now beginning to move within range of triggering a major breakout trade.
If you're bullish on Archrock, then I would look for long-biased trades as long as this stock is trending above some near-term support around $4.50 a share or above its new 52-week low of $4.10 a share and then once it breaks out above some near-term overhead resistance levels at Tuesday's intraday high of $5.07 a share and then above $5.74 to its 20-day moving average of $6.06 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 926,695 shares. If that breakout lights up soon, then this stock will set up to re-test or possibly take out its next major overhead resistance levels at $7 to $7.62, or even its 50-day moving average of $8.03 a share.
By Roberto Pedone
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