When "Insider" Greed Is Good

Not all insider buys are made equal. But when you focus on the right ones, the reward can be tremendous.

What do Elon Musk and Mary Dillon have in common?

Both are CEOs who have bought shares of their own companies just before the share prices moved higher.

You have probably heard of Elon Musk, the CEO of Tesla. In 2013, he made a big statement by buying over a million shares of Tesla stock for $100 million even though he already had plenty of shares.

Musk went out on the limb even further, as he had to borrow the money from Goldman Sachs to buy the shares. He used his previous holdings in Tesla, and stakes in other companies, as collateral. Since then, shares of Tesla are up over 100%.

But who is Mary Dillon?

She's the President and CEO of Ulta Beauty, a cosmetics and beauty product retailer with stores across the United States.

The CEO of Ulta bought nearly a million dollars worth of shares on the open market in March 2014 and September 2014.

Since the March 2014 purchase, shares are up 175%.

Clearly it is beneficial for investors to follow insider buying activity. Digging below the surface to find the obscure purchases by folks like Mary Dillon is where the big rewards can be found.

Insider Buying Sends a Strong Signal

Why would these two CEOs spend so much of their money on their own companies' stock when they already own a ton shares already?

Greed!

Pure and simple.

The opportunity to make more money motivates people - even people who are already billionaires like Elon Musk.

If top insiders are buying, it's because they know something very good is going on at the company. Maybe it is a new product. Or contract. Or pending merger.

Whatever the reason, they are very confident that shares will be on the rise. After all, who would buy more stock in a company if they knew it was sinking???

Massive Insider Opportunity Ends Sunday

Just a few days ago, key insiders suddenly poured over $10 million of their own money into shares of their market-leading retail company. They already receive stock options as part of their compensation, but they're scooping up even more on the open market. This kind of "insider buy" can only mean one thing:

Those "in-the-know" expect a major price jump.

Don't miss your chance to make the most of this and a selection of other compelling opportunities. Check Zacks' insider portfolio before it closes to public entry midnight - Sunday, February 19.

See insider trades now >>

Buy When the Insiders Buy

When high level insiders buy, they are required to report the purchases to the SEC within 48 hours of the trade. The trade then becomes public information.

Hedge funds and other professional investors routinely use this information to get an edge on their trades.

For most of us, though, it's not easy to get access to the insider information. While the media will tout huge insider buys like Elon Musk's $100 million purchase, did you hear anything about Mary Dillon's $475,000 purchase in September 2014?

More recently, the top insiders have continued to buy. But did they report it on the front page when Charles Swoboda, CEO of Cree, bought 10,000 shares in October 2016? Of course not. Yet Cree is up 16% since that purchase.

The challenge is getting easy and reliable access to all the insider trades and then figuring out which ones to buy.

Where to Find the Insider Buys

Anyone can go on the SEC website and get the insider trading information, but it's time consuming to search by individual companies.

Some investment firms collect the insider buying data and can provide it to you as a weekly list. Have you ever seen one of those lists? The sheer number of companies can be overwhelming.

In some instances, the insiders have been known to buy en masse. Then what's an investor to do?

This happened during the stock market dip in August 2011. As stock prices fell, insiders felt that their companies were undervalued and rushed out to buy shares.

That August, insiders bought stock in 50 different S&P 500 companies in just one week. Even if you got a list of those stocks, how would you narrow it down to the stocks that were truly worth buying?

The Bank Insiders Were Buying: Did You?

Were you surprised by the strength of the financial stocks this year?

Maybe you shouldn't have been.

One of the biggest CEO insider buys this year was by Jamie Dimon of JPMorgan Chase who bought 500,000 shares for $26 million in February 2016.

On the day he bought, JPMorgan's shares had hit a new 2016 low and were down 16.5% year-to-date thanks to the early year stock market sell off.

At the time, Dimon already had 7 million shares of JPMorgan stock in his 401k and his wife also owned a million shares in her own account.

It was just Dimon's third purchase of shares on the open market in the prior 12 years. He bought 500,000 shares in January 2009 during the Great Recession doom when bank shares were plunging to multi-year lows and another 500,000 in July 2012.

What did Jamie Dimon know that February?

The shares have since soared 59%.

In 2016, the Bankers Dove In

But he wasn't the only banker buying earlier this year.

At Huntington Bancshares, three corporate insiders, including the CEO and CFO, bought on February 1. Since then, the shares have risen 53%.

At Zions Bancorporation, between January 28 and February 9, the CEO, the CFO, a director and two Executive Vice Presidents all bought shares. The shares are up 104%.

At KeyCorp, there was a huge cluster buy of insider buying between January 25 and February 8 that resulted in 9 directors and the CEO all buying shares. The stock is up 71% since those buys.

These Insiders Know Something You Don't

Why are insiders suddenly buying up company stock shares with their own money?

According to legendary investor Peter Lynch, that when major officers sell shares of their own companies they may do so for a variety of reasons. But they buy for only one reason: They expect the stock price to go up.

Zacks distilled a handful of the most compelling insider stock purchases, and is opening them to public view -- only until Sunday, December 18.

See the stocks now >>

Insider Buying Sends a Strong Signal

Why would these CEOs and corporate insiders spend so much of their money on their own companies' stock when they already own a ton of shares already?

Greed!

Pure and simple.

The opportunity to make more money motivates people -- even people who are already millionaires like Jamie Dimon.

If top insiders are buying, it's because they know something very good is going on at the company. Maybe it is a new product. Or contract. Or pending merger.

Whatever the reason, they are very confident that shares will be on the rise. After all, who would buy more stock in a company if they knew it was sinking???

Buy When the Insiders Buy

When high level insiders buy, they are required to report the purchases to the SEC within 48 hours of the trade. The trade then becomes public information.

Hedge funds and other professional investors routinely use this information to get an edge on their trades.

For most of us, though, it's not easy to get access to the insider information. While the media will trumpet huge insider buys like Dimon's $26 million buy, did you hear anything about Cree CEO Charles Swoboda's $222,000 buy of 10,000 shares on October 20?

The challenge is getting easy and reliable access to all the insider trades and then figuring out which ones to buy.

Where to Find the Insider Buys

Anyone can go on the SEC website and get the insider trading information, but it's time consuming to search by individual companies.

Some investment firms collect the insider buying data and can provide it to you as a weekly list. Have you ever seen one of those lists? The sheer number of companies can be overwhelming.

In some instances, the insiders have been known to buy en masse. Then what's an investor to do?

This happened during the stock market dip in August 2011. As stock prices fell, insiders felt that their companies were undervalued and rushed out to buy shares.

That August, insiders bought stock in 50 different S&P 500 companies in just one week. Even if you got a list of those stocks, how would you narrow it down to the stocks that were truly worth buying?

To solve this problem, our Zacks research team developed a strategy that monitors selected insider buying activity at companies that already show strong earnings and excellent valuations. We do the work of sifting through all the insider buys so you don't have to.

Just a handful of stocks meet the demanding criteria of our Zacks' Insider Trader. Right now, we've narrowed it down to 11 insider buys that make the grade.

One of them is a particularly massive "Cluster Buy" in which 5 high-ranking officers spent over $5.2 million of their own money to buy shares of their small-cap defense company.

What's more, all 5 of these insiders already own thousands of shares -- but they wanted more. Even the CFO got in on the action. I rarely see such compelling testimony to the future of the company.

With the announcement of a new government contract projected to double the size of a key division, this stock looks to be ready to rocket higher.

You are welcome to share this and 10 other insider trades with explosive gain potential. But please be aware that we must limit access to these stocks. Entry to our portfolio closes to new investors Sunday, December 18.

See Zacks' Insider Stocks Now >>

by Tracey Ryniec

Source: https://www.zacks.com/commentary/98262/the-bank-insiders-were-buying-did-you

5 Stocks Insiders Love Right Now

Insiders at these companies have been scooping up shares of their own stock lately.

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.

Stocks with notable insider activity is something that I tweet about on a regular basis. These are also the exact type of stocks that I love to trade and alert in real-time.

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.

Wintrust Financial

One financial player that insiders are loading up on here is Wintrust Financial  (WTFC) , which provides banking and other financial products and services to customers in the Chicago metropolitan area and in southern Wisconsin. Insiders are buying this stock into big strength, since shares have soared higher by 33.5% over the last six months.

Wintrust Financial has a market cap of $2.7 billion and an enterprise value of $3 billion. This stock trades at a fair valuation, with a trailing price-to-earnings of 17 and a forward price-to-earnings of 14.2. Its estimated growth rate for this year is 21.5%, and for next year it's pegged at 6.2%. This is not a cash-rich company, since the total cash position on its balance sheet is $968.46 million and its total debt is $1.23 billion.

A director just bought 9,500 shares, or about $504,000 worth of stock at $53.11 per share. From a technical perspective, Wintrust Financial is currently trending above both its 50-day and 200-day moving averages, which is bullish. This stock has been uptrending over the last month and change, with shares moving higher off its low of $46.62 a share to its recent high of $54 a share. During that uptrend, shares of Wintrust Financial 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 big breakout trade above some key near-term overhead resistance levels.

If you're bullish on Wintrust Financial, then I would look for long-biased trades as long as this stock is trending above its 50-day moving average of $51.63 a share and then once it breaks out above some near-term overhead resistance levels at $54 to $54.09 a share and then above its 52-week high of $55 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 362,897 shares. If that breakout fires off soon, then this stock will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that move are $60 to $65 a share.

READ MORE: Trade These 5 Biotech Breakouts Now for Big Gains

Delta Air Lines

Another stock that insiders are active in here is Delta Air Lines  (DAL) , which provides scheduled air transportation for passengers and cargo in the U.S. and internationally. Insiders are buying this stock into notable weakness, since shares have fallen by 13.6% over the last six months.

Delta Air Lines has a market cap of $28.8 billion and an enterprise value of $34.4 billion. This stock trades at a cheap valuation, with a trailing price-to-earnings of 6.2 and a forward price-to-earnings of 6.5. Its estimated growth rate for this year 27.1%, and for next year it's pegged at 1.2%. This is not a cash-rich company, since the total cash position on its balance sheet is $2.96 billion and its total debt is $7.80 billion. This stock currently sports a dividend yield of 1.3%.

The CFO just bought 25,000 shares, or about $972,000 worth of stock, at $33.91 per share.

From a technical perspective, Delta Air Lines is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has been uptrending over the last month and change, with shares moving higher off its low of $32.60 a share to its recent high of $41.35 a share. During that uptrend, shares of Delta Air Lines have been making mostly higher lows and higher highs, which is bullish technical price action.

If you're bullish on Delta Air Lines then I would look for long-biased trades as long as this stock is trending above some near-term support levels at $38.27 or at $37 a share and then once it breaks out above some near-term overhead resistance levels at $39.20 to its 50-day moving average of $39.80 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 11.81 million shares. If that breakout takes hold soon, then this stock will set up to re-test or possibly take out its next major overhead resistance levels at $41.35 to $43, or even $44.50 to its 200-day moving average of $45.36 a share.

5 Stocks With Big Insider Buying

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.

Stocks with notable insider activity is something that I tweet about on a regular basis. These are also the exact type of stocks that I love to trade and alert in real-time.

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.

aTyr Pharma

One stock with some decent insider buying is biotherapeutics player aTyr Pharma  (LIFE) , which engages in the discovery and clinical development of Physiocrine-based therapeutics for patients suffering from severe and rare diseases. Insiders are buying this stock into massive weakness, since shares have plunged by 65% over the last six months.

aTyr Pharma has a market cap of $92.3 million and an enterprise value of -$11.3 million. This stock trades at a fair valuation, with a price-to-book of 0.71. Its estimated growth rate for this year is 2.6%, and for next year it's pegged at -11.5%. This is a cash-rich company, since the total cash position on its balance sheet is $108.80 million and its total debt is $5.95 million.

A director just bought 85,000 shares, or about $273,000 worth of stock at $3.22 per share. That same director also justbought 32,659 shares, or about $116,000 worth of stock at $3.45 per share.

From a technical perspective, aTyr Pharma is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has been uptrending strong over the last few trading sessions, with shares moving higher off its new 52-week low of $3.03 a share to its intraday high on Wednesday of $4.02 a share. During that uptrend, shares of aTyr Pharma has been making mostly higher lows and higher highs, which is bullish technical price action. This stock has also seen an extreme spike in its upside volume over these last few trading sessions, and it's now quickly moving within range of triggering a near-term breakout trade.

If you're bullish on aTyr Pharma, then I would look for long-biased trades as long as this stock is trending above some its new 52-week low of $3.03 a share and then once it breaks out above some near-term overhead resistance at $4.08 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 325,463 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 its 20-day moving average of $4.39 a share to its 50-day moving average of $4.58 a share, or even $5 to $5.50 a share.

Sears Holdings

One department stores player that insiders are in love with here is Sears Holdings  (SHLD - Get Report) , which operates as a retailer in the U.S. Insiders are buying this stock into large weakness, since shares have fallen by 41.1% over the last six months.

Sears Holdings has a market cap of $1.5 billion and an enterprise value of $4.5 billion. This stock trades at a fair valuation, with a price-to-sales of 0.06. Its estimated growth rate for this year is -68.6%, and for next year it's pegged at 20.6%. This is not a cash-rich company, since the total cash position on its balance sheet is $238 million and its total debt is $3.14 billion.

The CEO just bought 57,261 shares, or about $821,000 worth of stock, at $14.34 to $14.40 per share.

From a technical perspective, Sears Holdings is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock has just started to spike higher right off its 20-day moving average of $14.95 a share. This spike is quickly pushing shares of Sears Holdings within range of triggering a near-term breakout trade above some key overhead resistance levels.

If you're bullish on Sears Holdings then I would look for long-biased trades as long as this stock is trending above its new 52-week low of $14.05 a share and then once it breaks out above some near-term overhead resistance levels at $15.44 to $16.15 a share and then above its 50-day moving average of $16.18 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 671,758 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 $18 to $18.72, or even $19.50 to its 200-day moving average of $21.03 a share.

Conn's

Another stock that insiders are in love with here is Conn's  (CONN - Get Report) , which operates as a specialty retailer of durable consumer goods and related services in the U.S. Insiders are buying this stock into massive weakness, since shares have dropped sharply by 53.6% over the last six months.

Conn's has a market cap of $345 million and an enterprise value of $1.4 billion. This stock trades at a cheap valuation, with a trailing price-to-earnings of 9.1 and a forward price-to-earnings of 7.3. Its estimated growth rate for this year 14.6%, 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 $109.07 million and its total debt is $1.16 billion.

A beneficial owner just bought 250,000 shares, or about $2.68 million worth of stock, at $10.74 per share.

From a technical perspective, Conn's 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 month and change, with shares moving lower off its high of $21.48 a share to its new 52-week low of $10.25 a share. During that downtrend, shares of Conn's 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 $10.25 low and it's quickly moving within range of triggering a big breakout trade above some key overhead resistance levels.

If you're in the bull camp on Conn's, then I would look for long-biased trades as long as this stock is trending above its new 52-week low of $10.25 a share and then once it breaks out above some near-term overhead resistance levels at $12 to $12.64 a share and then above $13 a share with volume that hits near or above its three-month average action of 1 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 its 20-day moving average of $13.54 a share to its 50-day moving average of $15.18 a share, or even $16 to $17.50 a share.

William Lyon Homes

One homebuilder that insiders are jumping into here is William Lyon Homes  (WLH - Get Report) , which designs, constructs, markets and sells single-family detached and attached homes in California, Arizona, Nevada, Colorado, Washington and Oregon. Insiders are buying this stock into strength, since shares ripped up 27.9% over the last three months.

William Lyon Homes has a market cap of $493 million and an enterprise value of $1.5 billion. This stock trades at a cheap valuation, with a trailing price-to-earnings of 10.5 and a forward price-to-earnings of 5.7. Its estimated growth rate for this year is 35.8%, and for next year it's pegged at 33.3%. This is not a cash-rich company, since the total cash position on its balance sheet is $50.20 million and its total debt is $1.1 billion.

A beneficial owner just bought 172,725 shares, or about $2.46 million worth of stock, at $14.27 per share.

From a technical perspective, William Lyon Homes is currently trending above its 50-day moving average and below its 200-day moving averages, which is neutral trendwise. This stock has been uptrending strong over the last two months and change, with shares ripping higher off its new 52-week low of $7.61 a share to its recent high of $15.80 a share. During that uptrend, this stock has been consistently making higher lows and higher highs, which is bullish technical price action. This strong uptrend has now pushed shares of William Lyon Homes within range of triggering a near-term breakout trade.

If you're bullish on William Lyon Homes, then I would look for long-biased trades as long as this stock is trending above some near-term support at $13.50 a share and then once it breaks out above some near-term overhead resistance levels at $15.80 to $16.76 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 835,995 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 $18.09 to its 200-day moving average of $18.17, or even $20 to $22 a share.

vTv Therapeutics

One biopharmaceutical player that insiders are loading up on here is vTv Therapeutics  (VTVT) , which discovers, develops and sells orally administered small molecule drug candidates worldwide. Insiders are buying this stock into notable weakness, since shares have dropped by 24.4% over the last six months.

vTv Therapeutics has a market cap of $167 million and an enterprise value of -$50.3 million. This stock trades at a premium valuation, with a price-to-sales of 38.06. Its estimated growth rate for this year is 10.2%, and for next year it's pegged at 25.8%. This is a cash-rich company, since the total cash position on its balance sheet is $97.01 million and its total debt is zero.

A beneficial owner just bought 400,000 shares, or about $2.07 million worth of stock, at $5.20 per share.

From a technical perspective, vTv Therapeutics is currently trending below both its 20-day and 50-day moving averages, which is bearish. This stock has been downtrending badly over the last five months, with shares moving lower off its high of $7.70 a share to its new 52-week low of $4.89 a share. During that downtrend, this stock has been consistently making lower highs and lower lows, which is bearish technical price action.

If you're bullish on vTv Therapeutics, then I would look for long-biased trades as long as this stock is trending above its new 52-week low of $4.89 a share and then once it breaks out above some near-term overhead resistance levels at $5.20 to its 20-day moving average of $5.31 a share with volume that hits near or above its three-month average action of 45,274 shares. If that breakout takes hold soon, then this stock will set up to re-test or possibly take out its next major overhead resistance levels at $5.50 to its 50-day moving average of $5.76, or even $6 to $6.20 a share.

By Roberto Pedone

Source:http://www.thestreet.com/story/13529550/1/5-stocks-with-big-insider-buying.html