4 Stocks With Heavy Insider Buying

 |  Includes: CAR, GERN, TWMC
by: Leonid Kanopka

There can be several reasons why insiders might sell their own company's stock: Buying a big personal purchase like a house, or sometimes they need cash to fund a charity, and other times insiders might sell because their stock is overvalued and no longer attractive at current prices.

Whichever the case is, we can all agree why insiders buy shares, and this is because they think the stock is a bargain and has upside potential. When mutual funds or hedge fund managers (and even everyday investors) see a lot of insider activity, it most definitely triggers a reason for a second look into the company. Recently, a number of corporate insiders have bought large amounts of stock in their own companies. The four stocks below have seen heavy insider buying, which warrants a second look at these stocks as a possible buy.

  1. Geron Corporation (NASDAQ:GERN) is a biopharmaceutical company, it develops biopharmaceuticals for the treatment of cancer and chronic degenerative diseases, including spinal cord injury, heart failure, and diabetes. Geron has substantial insider buying, which could signal deep value. This stock is off by over 55% so far in 2011. The current price is $2.26 with an analyst 1 year price target of $7.33, which could mean 224.34% upside potential. This potential upside is reflected not only in the analysts consensus, but also in insider buying. Geron Corp. has a market cap of $297 million and an enterprise value of $155 million, and has no profit as of yet. The operating cash flow is -$52 million and leveraged free cash flow is -$45 million. On the balance sheet, however, total cash is $152 million and no debt, which shows great potential for managing money. A good reason to look at this stock as a possible buy is the fact that a director just bought 50,000 shares, or $101,500 worth of stock at a price of $2.03 per share.

  2. Avis Budget Group, Inc. (NASDAQ:CAR) together with its subsidiaries, Avis provides car and truck rentals, and ancillary services to businesses and consumers. It seems that insiders are finding value in the current price; the stock is off by 22% so far for 2011. The current price is $12.33 with a 1 year price target of $25, signaling a 102.76% upside potential. Avis has a market cap of 1.30B and an enterprise value of 9.43 billion, which shows huge growth potential in the share price, not to mention a trailing P/E of 12.79x and a forward P/E of 6.88x. Avis has an estimated growth rate for the next quarter of 283% and 100% estimated for the year. The only potential pitfall I see for this company is the amount of debt on its balance sheet. Total cash is only 645.00M, while the total debt is a staggering 8.79B. If Avis can get its debt under control, this company would be a strong buy. And it seems analysts and insiders alike are confident the company can. The CEO and chairman of the board bought 50,000 shares, or $449,315 worth of stock at a price of $8.99, and a number of other directors have also bought Avis totaling over $400,000 in the past couple of weeks.

  3. Trans World Entertainment Corporation (NASDAQ:TWMC) through its subsidiaries, operates as a specialty retailer of entertainment software products. This includes music, video, video games, and other related products through its retail stores and e-commerce sites in the United States. The current stock price is $2.17 with a 1 year price target of 2.75, which shows a 26.73% upside potential, not to mention the stock is up over 30% for the year thanks to insiders buying shares. Trans World has a market cap of $68.57M and an enterprise value of $36.64M. The stock is trading at a price-to-sales of 0.12 and a price to book value of 0.46. However, the company does have $29.67M in cash on its balance sheet compared to total debt of only $6.55M. I also like the fact that Trans World's days sales in inventory has been higher than its subsector average for the past 5 years. It seems that this stock has also developed a very bullish momentum, shares are currently trading 13.1% above its 50-day moving average of $1.93 and 17.2% above its moving average of $1.86. Heavy momentum at such a rapid pace usually signals substantial buying opportunities, and it seems insiders are taking advantage: The CEO and chairman of the board just bought 75,000 shares, or $155,985 worth of stock at a price of $2.14 per share, not to mention his purchase of 200,000 or $410,000 worth of stock for $2.05 at the end of August.

  4. NVIDIA Corporation (NASDAQ:NVDA) provides visual computing, high performance computing, and mobile computing solutions that generate interactive graphics on various devices ranging from tablets and smart phones to notebooks and workstations. The current price is $15.12, with a one year price target of $18.10, signaling a 19.71% upside potential. NVIDIA has a market cap of 9.1B and an enterprise value of 6.29B, and seems to trade at a reasonable valuation. The trailing P/E is 16.82x with a forward P/E of 13.22x. NVIDIA has an estimated growth rate for the year of 52.8% and a 14% growth estimate for next year. Any time a company grows this fast, a second look is imperative. I love the fact that this company is extremely cash-rich, with a total cash position on its balance sheet of 2.47B and only 22.49M in total debt. A Director just bought 100,000 shares, or $1.2M worth of stock at a price of $11.91 per share. Another reason NVIDIA is a good buy is because the company has improved its position in the integrated processor market with its new multi-year patent cross licensing agreement with Intel (NASDAQ:INTC).

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