DELAFIELD, Wis. (Stockpickr) -- Corporate insiders sell their own companies' stock for a number of reasons.
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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.
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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, its large 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 it's twice as important to make sure the trend of the stock coincides with the insider buying.
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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. Here's a look at five stocks whosed insiders have been doing some big buying per SEC filings.
SolarCity
One renewable energy player that insiders are snapping up a huge amount of stock in here is SolarCity (SCTY), which is engaged in designing, sales, engineering, installation, monitoring, maintenance and financing of solar energy systems to residential and commercial customers, and sale of electricity generated by solar energy systems to customers. Insiders are buying this stock into major strength, since shares are up 375% so far in 2013.
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SolarCity has a market cap of $4.4 billion and an enterprise value of $4.7 billion. This stock trades at a premium valuation, with a price-to-sales of 37.33 and a price-to-book of 25.70. Its estimated growth rate for this year is 67.4%, 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 $159.61 million and its total debt is $299.36 million.
A director just bought 214,869 shares, or $10 million worth of stock, at $46.54 a share. The CEO also just bought 107,434 shares, or about $4.99 million worth of stock, at $46.54 a share. An officer also just bought 107,434 shares, or about $4.99 million worth of stock, at $46.54 a share.
From a technical perspective, SCTY 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 two months, with shares soaring higher from its low of $28.31 to its recent high of $64.50 a share. During that uptrend, shares of SCTY have been making mostly higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of SCTY into overbought territory, since its current relative strength index reading is 72.
If you're bullish on SCTY, then I would look for long-biased trades off a significant pullback, since this stock is too extended above both its 50-day and 200-day moving averages. This stock has put in a major run recently, so it would be wise to wait for lower prices before initiating any new long positions. Some possible buy areas could be around $50 to $45 a share. Let this stock cool off first and base for a bit before jumping in.
Acorn Energy
Another technology player that insiders are active in here is Acorn Energy (ACFN), which provides digital solutions for energy infrastructure asset management. Insiders are buying this stock into major weakness, since shares are off by 56% so far in 2013.
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Acorn Energy has a market cap of $62 million and an enterprise value of $45 million. This stock trades at a reasonable valuation, with a price-to-sales of 2.98 and a price-to-book of 1.56. Its estimated growth rate for this year is -11.8%, and for next year it's pegged at 50%. This is a cash-rich company, since the total cash position on its balance sheet is $13.35 million and its total debt is just $251,000. This stock currently sports a 4.3% dividend yield.
A director just bought 80,000 shares, or $228,000 worth of stock, at $2.85 per share.
From a technical perspective, ACFN 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 four months, with share plunging from its high of $9.90 to its recent low of $2.85 a share. During that downtrend, shares of ACFN have been consistently making lower highs and lower lows, which is bearish technical price action. That said, shares of ACFN have now entered oversold territory, since its current relative strength index reading is 33.31. Oversold can always get more oversold, but it's also an area where a stock can rebound sharply higher from.
If you're in the bull camp on ACFN, then look for long-biased trades as long as this stock is trending above some near-term support at $3.21 and then once it breaks out above some near-term overhead resistance at $3.59 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 213,249 shares. If that breakout triggers soon, then ACFN will set up to re-test or possibly take out its next major overhead resistance levels at $4.50 to its 50-day moving average at $5.37 a share. This stock could even hit $6 if we see big volume move in here on that breakout.
EV Energy Partner LP
One energy player that insiders are jumping into big here is EV Energy Partner LP (EVEP), which is engaged in the development and production of oil and natural gas properties. Insiders are buying this stock into big weakness, since shares are down by 33% so far in 2013.
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EV Energy Partner LP has a market cap of $1.6 billion and an enterprise value of $2.5 billion. This stock trades at a cheap valuation, with a forward price-to-earnings of 25.67. Its estimated growth rate for this year is 155.3%, and for next year it's pegged at 595.2%. This is not a cash-rich company, since the total cash position on its balance sheet is $8.28 million and its total debt is $1.02 billion. This stock currently sports a dividend yield of 8.4%.
The chairman of the board just bought 135,000 shares, or about $4.97 million worth of stock, at $36.86 per share. The CEO also just bought 15,000 shares, or about $552,000 worth of stock, at $36.86 per share.
From a technical perspective, EVEP is currently trending above its 50-day moving average and well below its 200-day moving average, which is neutral trendwise. This stock has been trending sideways and consolidating over the last two months and change, with shares moving between $34.01 on the downside and $39.74 on the upside. Shares of EVEP have just started to trend back above its 50-day moving average, and it's quickly moving within range of triggering a breakout trade above the upper-end of its sideways chart pattern.
If you're bullish on EVEP, then look for long-biased trades as long as this stock is trending above some key near-term support levels at $36.55 or at $35.60 and then once it breaks out above some near-term overhead resistance levels at $38.94 to $39.74 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 254,366 shares. If that breakout triggers soon, then EVEP will set up to re-test or possibly take out its next major overhead resistance levels at $42 to $42.50, or even its 200-day moving average of $43.29 a share.
Ryman Hospitality Properties
One REIT player that insiders are in love with here is Ryman Hospitality Properties (RHP), which operates as a real estate investment trust specializing in group-oriented, destination hotel assets in urban and resort markets. Insiders are buying this stock into notable weakness, since shares are off by 14% during the last six months.
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Ryman Hospitality Properties has a market cap of $1.8 billion and an enterprise value of $2.9 million. This stock trades at a premium valuation, with a trailing price-to-earnings of 86.47 and a forward price-to-earnings of 27.94. Its estimated growth rate for this year is 400%, and for next year it's pegged at -20.2%. This is not a cash-rich company, since the total cash position on its balance sheet is $44.40 million and its total debt is $1.15 billion. This stock currently sports a dividend yield of 5.5%.
The CEO just bought 6,682 shares, or about $232,000 worth of stock, at $34.79 per share.
From a technical perspective, RHP is currently trending above its 50-day moving average and just below its 200-day moving average, which is neutral trendwise. This stock has been uptrending strong over the last two months, with shares moving higher from its low of $32.50 to its recent high of $37.96 a share. During that move, shares of RHP have been making mostly higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of RHP within range of triggering a big breakout trade.
If you're bullish on RHP, then look for long-biased trades as long as this stock is trending above some near-term support at $36 and then once it breaks out above some near-term overhead resistance levels at its 50-day of $38.43 to some past resistance at $38.74 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 795,155shares. If that breakout triggers soon, then RHP will set up to re-test or possibly take out its next major overhead resistance levels at $42 to $44 a share, or even $47 a share.
Accelrys
One final name with some large insider buying is Accelrys (ACCL), which develops and commercializes scientific business intelligence software and solutions that enable its customers to accelerate the discovery and development of new drugs and materials. Insiders are buying this stock into modest strength, since shares are up 7.9% so far in 2013.
Accelrys has a market cap of $542 million and an enterprise value of $404 million. This stock trades at a premium valuation, with a trailing price-to-earnings of 85.70 and a forward price-to-earnings of 25.71. Its estimated growth rate for this year is -8.6%, and for next year it's pegged at 18.8%. This is a cash-rich company, since the total cash position on its balance sheet is $130.84 million and its total debt is zero.
A beneficial owner just bought 200,000 shares, or about $1.88 million worth of stock, at $9.40 per share.
From a technical perspective, ACCL 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 8.03 to its recent high of $10 a share. During that uptrend, shares of ACCL have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of ACCL within range of triggering a big breakout trade.
If you're bullish on ACCL, then look for long-biased trades as long as this stock is trending above its 50-day at $9.43 or its 200-day at $9.19 and then once it breaks out above some near-term overhead resistance at $9.90 a share to its 52-week high at $10 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 121,560 shares. If that breakout triggers soon, then ACCL will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that breakout are $13 to $15 a share.
To see more stocks with notable insider buying, check out the Stocks With Big Insider Buying portfolio on Stockpickr.
-- Written by Roberto Pedone in Delafield, Wis.
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At the time of publication, author had no positions in stocks mentioned.
Roberto Pedone, based out of Delafield, Wis., is an independent trader who focuses on technical analysis for small- and large-cap stocks, options, futures, commodities and currencies. Roberto studied international business at the Milwaukee School of Engineering, and he spent a year overseas studying business in Lubeck, Germany. His work has appeared on financial outlets including
CNBC.com and Forbes.com. You can follow Pedone on Twitter at www.twitter.com/zerosum24 or @zerosum24.
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