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When insiders are buying shares of their own company, it can be a good signal that prospects are better than Wall Street expects. After all, no one knows a company better than the management, and even though trading on non-public information is illegal, an insider purchase still signals confidence in the company.

For stocks that have underperformed over the last few months, insider buying can be an indication that the selling pressure is only temporary and that the stock is a good candidate for buying.

Below are three stocks that have underperformed the market over the last three months and which more than one insiders have bought during the last two weeks.

Nalco Holding Company (NYSE:NLC)

Nalco Holding Company (Nalco) provides integrated water treatment and process improvement services for industrial and institutional applications, combining chemical products and equipment, and on-site service and expertise. It operates in three segments: Water Services, Paper Services and Energy Services. (see full description).

Recent Insider Purchases

Date Who # of Shares Bought
02/16/2011 Daniel S. Sanders Director 10,000
02/16/2011 Mary M. VanDeWeghe Director 1,500


(Click to enlarge)

AOL, Inc. (NYSE:AOL)

AOL Inc. (AOL) is a global Web services company with a suite of brands and offerings. The Company’s business spans online content, products and services that it offers to consumers, publishers and advertisers. The Company markets its advertising offerings on both AOL Media and the Third Party Network under the brand AOL Advertising. It markets its offerings to publishers on the Third Party Network under the brand Advertising.com (see full description).

Recent Insider Purchases

Date Who # of Shares Bought
02/14/2011 Fredric G. Reynolds Director 12,000
02/11/2011 Tim Armstrong Chairman and Chief Executive Officer 477,000


(Click to enlarge

Flowers Foods, Inc. (NYSE:FLO)

Flowers Foods, Inc. (Flowers Foods) is a producer and marketer of bakery products in the United States. The company consists of two segments: direct-store-delivery (DSD) and warehouse delivery. The DSD segment focuses on the production and marketing of bakery products to United States customers in the Southeast, Mid-Atlantic and Southwest, as well as markets in California and Nevada primarily through its direct-store-delivery system. (see full description)

Recent Insider Purchases

Date Who # of Shares Bought
02/14/2011 Benjamin H. Griswold Director 25,000
02/10/2011 Benjamin H. Griswold Director 25,000


(Click to enlarge)

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: 3 Underperforming Stocks With Recent Insider Purchases