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As the old saying goes, insiders can sell their shares for a variety of reasons, but they only buy shares for one reason.... because they think they're going up. With that in mind, I screened the S&P 500 for stocks with two or more insider buys in the last six months and an EV / EBITDA less than 10x. Only the following 17 stocks passed the test.

Ticker Company Price Insiders Buying EV / EBITDA ROIC P/E
ED CONS EDISON INC 54.73 11 8.53 7.65% 15.43
KSS KOHLS CORP 55.17 4 6.25 18.16% 14.69
CHK CHESAPEAKE ENERG 29.78 4 6.39 11.98% 9.98
LO LORILLARD INC 111.51 3 8.59 254.42% 15.95
OI OWENS-ILLINOIS 33.00 3 8.23 16.70% 11.95
WIN WINDSTREAM CORP 13.30 3 7.58 12.41% 17.47
D DOMINION RES/VA 47.99 3 9.73 9.54% 14.52
FTR FRONTIER COMMUNI 8.66 3 7.75 8.49% 22.41
FCX FREEPORT-MCMORAN 48.27 2 4.48 44.47% 7.21
BA BOEING CO/THE 79.03 2 9.55 40.85% 19.33
DELL DELL INC 16.37 2 5.11 30.68% 11.40
BBY BEST BUY CO INC 32.31 2 4.17 25.73% 9.27
CA CA INC 22.90 2 6.24 19.10% 14.43
BLL BALL CORP 38.46 2 9.18 17.38% 12.48
DPS DR PEPPER SNAPPL 41.78 2 8.81 16.53% 16.61
DOV DOVER CORP 64.33 2 9.34 15.94% 17.19
TWX TIME WARNER INC 35.99 2 8.36 10.35% 14.73

With an average EV / EBITDA of 7.5x, ROIC of 33%, and P/E of just under 14.5x, the list certainly looks cheap, and the insider buying only reaffirms that thought. All of the names seem to warrant a closer look, but here are a few that caught my eye.

Dell's stock has been depressed on fears of tablets cutting into their consumer PC and laptop business and hurting revenue. However, Dell is now much more than just laptops and PCs, which only account for about 1/3 of revenue and 1/4 of operating income, and, even if revenue remains flat, Dell has plenty of ability to grow profits by increasing margins from their current 5% to 7.5%. At less than 12x earnings, shares certainly appear cheap. Michael Dell seems to think so, as he's acquired more than $250m worth of shares in the past six months.

Freeport-McMoran has been hit hard with the recent sell off in commodities. However, the company has some tremendous assets, great returns on capital, and a relatively strong balance sheet. At current prices, shares yield more than 2%, and long term demand for hard assets from emerging economies and the global economic rebound should drive the stock higher.

Finally, Best Buy has been hurt by concerns of a weaker consumer and competition from online retailers like Amazon. However, the company still enjoys a tremendous brand name and incredibly steady earnings, and their rock solid balance sheet, strong cash flows, and low valuations are allowing them to buy back tons of shares, which should create a lot of value for today's investors. Insiders aren't alone in liking the stock at current prices- David Einhorn has been adding shares in the low $30s. Also, ongoing state budget deficits could lead to a comprehensive online tax policy, which would even the field between Best Buy and online retailers.

All of these stocks are certainly worth looking into. The stocks look cheap, and the insiders are saying the companies have value the market is missing.

Source: 17 Undervalued Stocks With Insiders Buying