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Academic research has shown that corporate insiders have an edge over ordinary investors, especially when it comes to purchasing stocks. Even small purchases are marginally profitable. On the other hand, insider sales had not beaten the market as they are often motivated by diversification or liquidity needs. Insiders usually have a lot of exposure to their company's performance. It does not make sense for them to increase their exposure unless they believe that their purchases have a high probability of being profitable.

In this article, we are going to focus on the technology stocks insiders are buying recently. All companies have a market cap of at least $2 billion and were purchased by at least one insider during the past three months. The market data is sourced from Finviz.

Ticker

Company

Insiders

LXK

Lexmark International Inc.

1

RATE

Bankrate, Inc.

1

VMW

VMware, Inc.

1

AAPL

Apple Inc.

1

AYI

Acuity Brands, Inc.

1

BMC

BMC Software Inc.

1

FSL

Freescale Semiconductor Holdings I, Ltd.

1

FSLR

First Solar, Inc.

1

FTR

Frontier Communications Corporation

1

GLW

Corning Inc.

1

HPQ

Hewlett-Packard Company

1

QCOM

QUALCOMM Incorporated

1

S

Sprint Nextel Corp.

1

TRMB

Trimble Navigation Limited

1

WIN

Windstream Corporation

1

NIHD

NII Holdings Inc.

4

Among these 16 stocks with insider purchases over the past three months, Lexmark International Inc, Bankrate Inc, VMware and NII Holdings were purchased by insiders during the past month.

For example, NIHD was purchased by four insiders in December. The most recent purchase occurred on December 28th, when Ruben Butvilofsky bought thousands of NIHD shares at around $21 per share. Butvilofsky also purchased certain amounts of NIHD shares a day earlier. Two other insiders, Gokul Hemmady and Gary Begeman also bought 3,500 shares and 5,000 shares respectively at about $21.1 per share in late December. Sergio Chaia bought 10,000-plus shares of NIHD in early December at around $21 as well. NIHD is now trading at $19.23, lower than the prices at which these insiders purchased.

It seems that the stock has great potential to grow in the future as it is trading at attractive multiples. It has a forward P/E ratio of 11.26, a PEG ratio of 0.61, and a price-to-sales ratio of 0.50. At the end of September, there are 23 hedge funds with NIHD positions. For instance, Stephen Mandel's Lone Pine Capital initiated a brand new $189 million of NIHD over the third quarter. Lee Ainslie's Maverick Capital also had $54 million invested in NIHD at the end of September.

One large-cap stock with insider purchases over the past three months is Qualcomm Incorporated. The stock has a market cap of $98B and a P/E ratio of 21.46. It was purchased by one insider during the past three months. Director Francisco Ros bought 275 shares at $53.7867 on November 28. Ros also bought 200 shares at $49.3167 in early September. QCOM is now trading at $58.54. It is also very popular among hedge funds. At the end of September, there are 66 hedge funds reported to own QCOM in their 13F portfolios. Stephen Mandel and Lee Ainslie are also bullish about QCOM. Mandel's Lone Pine Capital had $351 million invested in QCOM, and Ainslie's Maverick Capital invested $328 million in this stock.

Another large-cap technology stock that insiders are bullish about is Hewlett-Packard. On December 2nd, John Hammergren purchased 1,000 shares at $28.2075. HPQ has a market cap of $57B and a low P/E ratio of only 8.77. The stock is now trading at $28.59 per share, up $1 from the price at which Hammergren purchased. HPQ is also quite popular among hedge funds. As of September 30, 2011, 43 hedge funds disclosed owning HPQ in their 13F portfolios. For instance, John Paulson's Paulson & Co had $341 million invested in HPQ at the end of September.

We like technology stocks. They are generally considered undervalued as a sector. Additionally, our past studies have shown that insider purchases on average outperformed the market over the following 12-month period. We believe that by imitating the corporate insiders, investors will be more likely to beat the market in the long term.

Source: 16 Technology Stocks Insiders Recently Purchased