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Insider buying makes 3 stocks attractive: Pro

Insider buying at three companies could be a sign of good things to come for their shares.

Looking at what stocks C-suite executives are picking up, Catalyst Mutual Funds Senior Portfolio Manager David Miller identified Matador Resources, Continental Resources and Conn's as attractive names to buy.

"So, whenever you have an executive who's buying in a big way where they've had a great previous track record, in an industry where things have been a little bit depressed, it can be a great opportunity," he said Friday on CNBC's "Halftime Report."

3 Stocks with insider buying

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Miller acknowledged that the trend doesn't always work but added that the odds are good.

"However, we found that the insiders—CEO, CFO, chairman of the firm—know far more than anyone else possibly could," he said. "Now, just because they don't have a crystal ball doesn't mean that they aren't the best place to look. We've seen that about two-thirds of time they do get it right."

Miller noted a few things to look for: At least three insiders buying a company's stock, at least a $10,000 purchase and at least one member of the C-suite.

Matador has seen buying by its CEO and several insiders over the past four weeks. Shares are up 58 percent from a low of $15.51 a year ago and down 18 percent from a high of $29.94 on July 1.

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Continental Resources also looks attractive, Miller said, citing more than $4.9 million of insider buying by CEO Harold Hamm.

"Harold Hamm has had a wonderful track record over the past several years," Miller said. "He was buying stock in the mid-20s on average over the past several years—about $30 million worth—so, he's had a very significant profit there. He's built a multibillion-dollar fortune for himself, and it looks like a great opportunity with depressed crude prices."

Lastly, Miller said he liked Conn's.

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"After the stock took a hit, the insiders started to reverse direction and buy in a big way," he said. "They were selling at higher prices earlier, and now they're buying into a depressed stock at Conn's. When you see a reversal in direction, where they all start buying, that could be a great opportunity."

On the flip side, insider selling could be a warning sign.

"If you looked at financials in late 2007, 2008, AIG, Merril Lynch, Lehman Brothers, Countrywide all had massive selling before everything blew up," he said. "So, it can be a great indicator for what sectors you should stay away from."