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Low-priced stocks tend to be more speculative in nature. These types of stocks are often volatile and that can add to the risks, but it can also bring great rewards. The shares of a major company like Johnson & Johnson (NYSE:JNJ) is not likely to make big moves either up or down, in fact, this stock has been trading in the low to high $60 range for many months. That might be ideal for part of your portfolio, but it can also make sense to add some lower-priced, higher-volatility stocks, as this could boost returns significantly.

The best strategy for large gains in low-priced stocks can be to buy when short-term challenges or concerns have pushed the stocks lower. This can give investors a chance to buy cheap. However, it's important to separate between stocks that are cheap and poised to rebound versus stocks that are just plain going lower. One way to help separate which stocks might be more likely to bounce back is by watching what insiders are doing. If insiders are buying a low-priced stock that just dropped in value, it could be a sign that it is a bargain, especially if insiders are buying significant amounts of stock. One of the best recent examples of a stock that was trading in the single digits, then saw insider buying, and went on to double in price was Sprint (NYSE:S). Daniel Hesse, the CEO of Sprint, and other insiders bought shares in April and May when the stock was in the low $2 range, and now it trades for nearly $5. Here is a closer look at two stocks that have recently dropped in value which also trade below $10, and have seen significant insider buying:

Delta Air Lines Inc., (NYSE:DAL) is one of the world's largest airlines. As such, the shares of this company have been impacted by the recent rebound in oil prices. Fuel is one of the most significant expenses for any airline, and this along with economic concerns, has helped to push the shares from about $11 in July, to below $9. However, if you look at the fundamentals, it appears that investors are overreacting. For example, airlines can and have raised prices and added fuel surcharges. Companies like Delta also use hedges to limit the impact of a sudden spike in fuel costs. Also, with earnings estimates at more than $2 per share for 2012, and for 2013, the stock now trades at just about 4 times earnings. The average stock in the S&P 500 Index trades for about 13 times earnings, which is another sign that Delta shares could be due for a rebound. One insider appears to be doing some bargain hunting in Delta shares: On August 28, 2012, Kenneth Woodrow, (a director), purchased 25,000 shares at $8.72 each. This transaction was valued at $217,928.

Key Data Points For Delta Airlines From Yahoo Finance:

  • Current Share Price: $8.65

  • 52-Week Range: $6.64 to $12.25

  • Dividend: none

  • 2012 Earnings Estimate: $2.14 per share

  • 2013 Earnings Estimate: $2.68 per share

  • P/E Ratio: about 4 times earnings

Callaway Golf Co. (NYSE:ELY) is a top brand in the golf world, and this company designs and markets golf clubs, and many related products. This stock was trading for over $7 per share earlier this year, but it now trades below $6. There are a number of signs that the stock is trading at bargain levels.

For example, on August 27, 2012, analysts at Roth Capital put a buy rating on the stock and said that Callaway shares could be poised to rebound beginning in 2013. It also believes that Callaway will be increasingly viewed as an acquisition target. This company has begun to implement cost-cutting measures, which are expected to yield about $52 million in annual savings. Callaway shares trade below book value, which is $8.27 per share. On August 30, 2012, Mark Lepowsky purchased 17,365 shares at $5.75 each. This transaction was valued at $99,848.80.

Key Data Points For Callaway Golf From Yahoo Finance:

  • Current Share Price: $5.75

  • 52-Week Range: $4.70 to $7.29

  • Dividend: 4 cents per share which yields .7%

  • 2012 Earnings Estimate: a loss of 64 cents per share

  • 2013 Earnings Estimate: breakeven results

  • P/E Ratio: n/a due to losses

Data is sourced from Yahoo Finance. No guarantees or representations are made. Please consult a financial advisor before making investments.

Source: Major Insider Buying In These 2 Stocks Trading Below $10