5 Stocks With Big Insider Buying

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.

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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, 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.

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 some stocks where insiders have been doing some big buying in per SEC filings.

Sigma Designs

One technology player that insiders are loading up on here is Sigma Designs (SIGM), which provides integrated chipset solutions that serve as the foundation for consumer products including televisions, set-top boxes and video networking products. Insiders are buying this stock into decent weakness, since shares are down by 13.9% in the last three months.

Sigma Designs has a market cap of $165 million and an enterprise value of $98 million. This stock trades at a premium valuation, with a forward price-to-earnings of 29.88. Its estimated growth rate for this year is 114.2%, and for next year it's pegged at -5.9%. This is a cash-rich company, since the total cash position on its balance sheet is $61.74 million and its total debt is zero.

The CEO just bought 454,546 shares, or $2.5 million worth of stock, at $5.50 per share.

From a technical perspective, SIGM is currently trending below both its 50-day and 200-day moving averages, which is a bearish sign. This stock recently gapped down from $5.50 to below $4.40 a share with heavy downside volume. Following that move, shares of SIGM went on to hit a new low of $4.04 a share. That said, this stock has started to rebound off that $4.04 low and it's now moving within range of triggering a near-term breakout trade.

If you're bullish on SIGM, then I would look for long-biased trades as long as this stock is trending above some near-term support at $4.48 or above its recent low of $4.04, and then once breaks out above some near-term overhead resistance at $4.85 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 299,402 shares. If that breakout hits soon, then SIGM will set up to re-fill some of its previous gap down zone that started at $5.500 a share. This stock could even tag $5.75 to $6.20 a share if that gap gets filled with strong upside volume flows.

Opko Health

Another healthcare player that insiders are jumping into here is Opko Health (OPK), which is a multi-national pharmaceutical and diagnostics company. Insiders are buying this stock into big time strength, since shares are up 76% in 2013.

Opko Health has a market cap of $3.4 billion and an enterprise value of $3.5 billion. This stock trades at a premium valuation, with a price-to-sales of 38.01 and a price-to-book at 4.01. Its estimated growth rate for this year is -218.2%. This is not a cash-rich company, since the total cash position on its balance sheet is $180.84 million and its total debt is $226.74 million.

The CEO just bought 19,400 shares, or about $171,000 worth of stock, at $8.79 to $8.90 per share. The same CEO also just bought 13,000 shares, or about $117,000 worth of stock, at $8.99 to $9.04 per share.

From a technical perspective, OPK 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 over the last few weeks, with shares falling from its high of $11.64 to its recent low of $8.17 a share. During that downtrend, shares of OPK have been making mostly lower highs and lower lows, which is bearish technical price action.

If you're in the bull camp on OPK, then I would look for long-biased trades as long as this stock is trending above its 200-day at $8.31 or above more key support at $8.17, and then once it breaks out above some near-term overhead resistance at $9.20 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 5.53 million shares. If that breakout hits soon, then OPK will set up to re-test or possibly take out its next major overhead resistance levels at its 50-day of $10.06 a share to $11.64 a share.

Tenet Healthcare

One healthcare player that insiders are snapping up a huge amount of stock in here is Tenet Healthcare (THC), which mainly operates acute care hospitals, ambulatory surgery centers, diagnostic imaging centers and related health care facilities. Insiders are buying this stock into solid strength, since shares have spiked higher by 26% in 2013.

Tenet Healthcare has a market cap of $4.07 billion and an enterprise value of $9.8 billion. This stock trades at a reasonable valuation, with a forward price-to-earnings of 15.19. Its estimated growth rate for this year is 2.3%, and for next year it's pegged at 52.5%. This is not a cash-rich company, since the total cash position on its balance sheet is $82 million and its total debt is a whopping $5.82 billion.

A beneficial owner just bought 248,910 shares, or about $9.9 million worth of stock, at $39.79 per share. This same beneficial owner also just bought 644,582 shares, or about $25.74 million worth of stock, at $39.78 per share.

From a technical perspective, THC 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 moving lower from its high of $48.48 to its recent low of $38.71 a share. During that downtrend, shares of THC have been making mostly lower highs and lower lows, which is bearish technical price action.

If you're bullish on THC, then I would look for long-biased trades as long as this stock is trending above its recent low of $38.71, and then once it breaks out above some near-term overhead resistance $41.32 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 1.91 million shares. If that breakout hits soon, then THC will set up to re-test or possibly take out its next major overhead resistance levels at its 50-day of $42.99 to its 200-day at $43.50 a share. Any high-volume move above those levels will then give THC a chance to tag its next major overhead resistance levels at $44.17 to $46 a share.

Aircastle

One commercial leasing player that insiders are active in here is Aircastle (AYR), which acquires, leases and sells high-utility commercial jet aircraft to passenger and cargo airlines throughout the world. Insiders are buying this stock into notable strength, since shares are up sharply by 52% in 2013.

Aircastle has a market cap of $1.5 billion and an enterprise value of $4.8 billion. This stock trades at a premium valuation, with a trailing price-to-earnings of 124.68. This is not a cash-rich company, since the total cash position on its balance sheet is $238.15 million and its total debt is $3.48 billion. This stock currently sports a dividend yield of 4.2%.

A director just bought 30,000 shares, or about $563,000 worth of stock, at $18.79 per share.

From a technical perspective, AYR 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 $15.84 to its recent high of $19.50 a share. During that uptrend, shares of AYR have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of AYR within range of triggering a big breakout trade.

If you're bullish on AYR, then I would look for long-biased trades as long as this stock is trending above its 50-day at $18.67 or above more support near $18, and then once it breaks out above its 52-week high at $19.50 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 430,032 shares. If that breakout hits soon, then AYR will set up to enter new 52-week high territory, which is bullish technical price action. Some possible upside targets off that breakout are $25 to $30 a share.

Atlantic Coast Financial

One final name with some big insider buying is Atlantic Coast Financial (ACFC), which operates as the bank holding company for Atlantic Coast Bank that provides various banking services to individual and business customers primarily in northeastern Florida and southeastern Georgia. Insiders are buying this stock into monster strength, since shares are up 101% in 2013.

Atlantic Coast Financial has a market cap of $10.31 million and an enterprise value of $130.76 million. This stock trades at a cheap valuation, with a price-to-sales of 0.53 and a price-to-book of 0.35. This is not a cash-rich company, since the total cash position on its balance sheet is $82.58 million and its total debt is $202.80 million.

A director just bought 1,289,077 shares, or about $4.83 million worth of stock, at $3.75 per share.

From a technical perspective, ACFC 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 month, with shares moving higher from its low of $3 to its recent high of $4.19 a share. During that uptrend, shares of ACFC have been consistently making higher lows and higher highs, which is bullish technical price action. That move has now pushed shares of ACFC within range of triggering a big breakout trade.

If you're bullish on ACFC, then look for long-biased trades as long as this stock is trending above its 50-day at $3.79 or above more support at $3.40, and then once it breaks out above some near-term overhead resistance levels at $4.19 to its 200-day at $4.42 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 44,167 shares. If that breakout triggers soon, then ACFC will set up to re-test or possibly take out its next major overhead resistance levels at $5 to $5.81 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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