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5 Stocks Insiders Love Right Now

Roberto Pedone|Contributor
Wednesday, 18 Jul 2012 | 12:51 PM ET
Source: Imax.com

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.

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 several stocks that insiders have been doing some big guying in per Securities and Exchange Commission filings.

1. IMAX

One stock that insiders are snapping up a huge amount of is Imax, which, together with its wholly owned subsidiaries, operates as an entertainment technology company specializing in motion picture technologies and presentations worldwide.

Insiders are loading up on this stock into strength, since shares are up a whopping 38 percent so far in 2012.

Imax has a market capitalization of $1.67 billion and an enterprise value of $1.62 billion.

This stock trades at a premium valuation, with a trailing price-to-earnings of 89 and a forward price-to-earnings of 22.38. Its estimated growth rate for this year is 135 percent, and for next year it’s pegged at 21.3 percent. This is not a cash-rich company, since the total cash position on its balance sheet is $21.59 million, and its total debt is $55 million.

A beneficial owner just bought 183,600 shares, or about $4.3 million worth of stock, at $22.62 to $24.11 per share. This same beneficial owner also just bought 326,400 shares, or about $7.49 million worth of stock, at $22.91 to $23.04 per share.

From a technical perspective, IMAX is currently trading above both its 50-day and 200-day moving averages, which is bullish. This stock recently bounced right off its 50-day at $22.50 a share, and it has now started enter breakout territory, with the stock moving above some near-term overhead resistance at $25.12 to $25.34 a share. That move started on Tuesday, and it was accompanied by massive upside volume of 3.34 million shares.

If you’re bullish on IMAX, then I would look for long-biased trades once it triggers its next major breakout trade above some past overhead resistance levels at $26.48 to $26.68 a share with high volume.

Look for volume on that breakout that registers near or above its three-month average action of 1.3 million shares. If we get that move soon, then IMAX could easily spike north of $30 a share.

I would avoid IMAX or look for short-baized trades if it fails to hold that near-term breakout over $25.12 to $25.34 a share, and then drops back below its 50-day at $22.50 and 200-day at $21.58 with high volume. If we get that action, then look for IMAX to trend back below $20 a share.

2. Synageva BioPharma

In the biotechnology and drugs complex, insiders are loading up on Synageva BioPharma, which is focused on the discovery, development and commercialization of therapeutic products for patients with life-threatening rare diseases and unmet medical needs.

Source: Synageva.com

Insiders are buying this stock into some big-time strength here, since shares are up over 80% so far in 2012.

Synageva has a market cap of $1.04 billion and an enterprise value of $903 million. This stock trades at a premium valuation, with a price-to-sales of 235.20 and a price-to-book of 6.85.

Its estimated growth rate for this year is 78.6%, and for next year it's pegged at — 51.10 percent. This is a cash-rich company, since the total cash position on its balance sheet is $138.92 million, and its total debt is zero.

A director and beneficial owner just bought 886,000 shares, or about $36.5 million worth of stock, at $41.20 per share. Another director also just bought 73,000 shares, or about $3 million worth of stock, at $41.20 per share.

From a technical perspective, Synageva is currently trading above both its 50-day and 200-day moving averages, which is bullish. This stock triggered a major breakout trade back in late June once it started to move above some past overhead resistance at $40.38 with massive upside volume.

Following that trigger, shares of Synageva pulled back briefly to around $40 a share, and then took off to hit its recent 52-week high of $49.93 a share. That move has started to push Synageva into overbought territory, since its current relative strength index reading is 80.42.

If you’re in the bull camp on Synageva, then I would wait for this stock to pullback significantly since it’s extended by almost 10 points above its 50-day moving average of $39.28 a share, and it’s almost 20 points above its 200-day moving average of $30.36 a share.

Look for a buying opportunity in Synageva once it pulls back closer to its 50-day moving average of $39.28 a share, at let’s say $42 to $40 a share if we get it.

Deckers Outdoor

3. Deckers Outdoor

Insiders are also snapping up a large amount of stock in Deckers Outdoor, a designer, producer, marketer, and brand manager of footwear, apparel, and accessories.

Source: Deckers.com

Insiders are sniffing out some deep value here, since this stock has traded down by over 35 percent so far in 2012.

Deckers Outdoor has a market cap of $1.80 billion and an enterprise value of $1.55 billion. This stock trades at a cheap valuation, with a trailing price-to-earnings of 9.79 and a forward price-to-earnings of 8.62.

Its estimated growth rate for this year is -11 percent, and for next year it’s pegged at 20.6 percent. This is a cash-rich company, since the total cash position on its balance sheet is $228.57 million, and its total debt is zero.

The CEO just bought 10,000 shares, or around $459,000 worth of stock, at $45.90 per share.

From a technical perspective, Deckers is currently trading below both its 50-day and 200-day moving averages, which is bearish.

This stock has been stuck in a nasty downtrend for the past eight months, with shares plunging from over $118.90 to a recent low of $42.16 a share. During that sharp move lower, shares of Deckers have consistently made lower highs and lower lows, which is bearish technical price action.

That said, the stock has started to reverse that trend and make higher lows and some higher highs. That move is quickly pushing Deckers within range of triggering a near-term breakout trade.

If you’re bullish on Deckers, then I would look for long-biased trades once this stock manages to clear some near-term overhead resistance at $48.41 a share, and then its 50-day moving average of $50.15 a share with high volume.

Look for volume on that move that’s tracking in near or above its three-month average action of 1.9 million shares. If that breakout triggers soon, then Deckers could easily re-test and possibly take out its next significant overhead resistance levels of $54.88 to $59.07 a share.

Keep in mind that we will need to see a high-volume trend above its 50-day to have any chance at hitting those targets.

On the flipside, I would avoid Deckers or look for short-baized trades if the stock fails to trigger that breakout soon, and then takes out its near-term support zones at $45 to $43.92, plus its 52-week low of $42.15 a share with high volume.

If we get that action, then Deckers could slide back below $40 a share if the bears gain full control of this stock. Keep in mind that it’s almost always bearish technical action when a stock continues to print new 52-week lows.

VeriFone Systems

4. Verifone Systems

Another stock that insiders are finding attractive here is business equipment player VeriFone Systems, which is engaged in the secure electronic payment solutions.

Source: Verifone.com

It provides solutions, and services for the financial, retail, hospitality, petroleum, transportation, government, and health-care vertical markets. Insiders are finding some deep value here, since this stock is down by over 33 percent in the last three months.

VeriFone has a market cap of $3.84 billion and an enterprise value of $5.13 billion. This stock trades at a reasonable valuation, with a trailing price-to-earnings of 16.7 and a forward price-to-earnings of 10.96.

Its estimated growth rate for this year is 38.5 percent, and for next year it's pegged at 22.2 percent. This is not a cash-rich company, since the total cash position on its balance sheet is $366.40 million, and its total debt is a whopping $1.61 billion.

The CEO just bought 155,000 shares, or around $5.03 million worth of stock, at $32.50 per share.

From a technical perspective, VeriFone is currently trading below both its 50-day and 200-day moving averages, which is bearish. This stock got hammered back in April, with shares plunging from a high of $55.89 to a recent low of $30.10 a share.

During that massive drop, shares of VeriFone were constantly making lower highs and lower lows, which is bearish technical price action. The stock also flashed a number of warning signs to longs with large gap downs on heavy volume.

That said, the stock has started to find some buying interest near $30 to $32 a share, and it’s now making higher lows and higher highs.

If you’re in the bull camp on VeriFone, I would look for long-biased trades if this stock can manage to trigger a near-term breakout trade above some overhead resistance levels at $36.78 to its 50-day moving average of $36.81 a share with high volume.

Look for volume on that move that hits near or above its three-month average volume of 3.6 million shares. If we get that breakout soon, then VeriFone could start to fill a recent gap down that started near $44 a share.

Some key levels to watch for are $40 a share which is near the low of the gap down day, and its 200-day moving average of $42.25 a share. If those levels get taken out with volume, then VeriFone could re-visit some more resistance at $47.82 a share.

On the flipside, I would avoid VeriFone or look for short-biased trades if it fails to trigger that breakout soon, and then drops below some major near-term support at $34 a share with heavy volume.

If we get that action, then VeriFone could head back towards $32 to $30 a share. Any future move below its 52-week low of $30.10 a share should be consider bearish price action, since most stocks that print new 52-week lows continue to do so for some time.

Hudson Global

5. Hudson Global

Another stock with some interesting insider buying is Hudson Global, which provides specialized professional-level recruitment and related talent solutions worldwide.

Source: Hudsonglobal.com

Insiders are buying this stock into some notable weakness, since shares are off by around 18 percent so far in 2012.

Hudson Global has a market cap of $143 million and an enterprise value of $113.14 million.

This stock trades at a reasonable valuation, with a trailing price-to-earnings of 18.71 and a forward price-to-earnings of 12.83.

Its estimated growth rate for this year is -147.1 percent, and for next year it’s pegged at 318.8 percent. This is a cash-rich company, since the total cash position on its balance sheet is $24.93 million and its total debt is $1.04 million.

A beneficial owner just bought 112,400 shares, or about $443,000 worth of stock, at $3.95 per share. The same beneficial owner also just bought 150,000 shares, or about $605,000 worth of stock, at $4.03 per share.

From a technical perspective, Hudson is currently trading above its 50-day moving average and below its 200-day moving averages which is neutral trendwise.

This stock took a dive off its April high of $5.98 to its recent low of $3.23 a share. During that large move lower, shares of Hudson were consistently making lower highs and lower lows, which is bearish technical price action.

That said, the stock formed a double bottom in mid-June at around $3.23 to $3.30 a share. Since marking that bottom, shares of Hudson have soared back above its 50-day moving average of $3.96 a share.

If you’re bullish on Hudson, then I would look for long-biased trades once this stock takes out its 200-day moving average of $4.61 a share with high volume.

Look for volume on that move that registers near or above its three-month average action of 107,522 shares.

If we get that move soon, then look for Hudson to trade back towards its next significant overhead resistance levels at $5.72 to $5.98 a share. It’s possible that Hudson could pull back to its 50-day at $3.96 a share before it challenges its 200-day.

I would simply avoid Hudson if it fails to trigger that breakout, and then moves back below its 50-day moving average at $3.96 and some more near-term support at $3.78 a share with heavy volume.

If we get that move, then Hudson could easily re-test its previous double bottom price levels at $3.30 to $3.32 a share. Any move below its 52-week low of $3.05 share should be considered bearish technical price action.

—By TheStreet.com Contributor Roberto Pedone

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Disclosures:

TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks. At the time of publication, Roberto Pedone had no positions in stocks mentioned.

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