There is one reason insiders are buying into magicJack VocalTec


While off for the month, the Israeli voice-over-internet-protocol (voip) teleco magicJack VocalTec ( CALL , quote ) is rising again in recent action. Investors should take note that insider buying is helping fuel the rise.

Year to date, VocalTec is up 76.06%, while the Standard & Poor's 500 Index has increased by 11.40% for 2012. Over the last month of market action, VocalTec fell by 0.37%, but like Hannibal, it has risen over the last week, soaring by 7.37% on strong volume.

The recent insider buying is a bullish sign for VocalTec. Investing legend Peter Lynch has stated there are many reasons for insiders to sell stock, including the need to raise capital to buy a home, or to pay tuition. Insider selling could also be part of a pre-planned program to diversify an individual's financial holdings. But according to Lynch, who guided the Fidelity Magellan Fund to annualized returns of 29.02% from 1977 to 1990, there is only one reason for an insider to buy the stock of a company: the expectation that the share price will continue to rise.

At VocalTech, Gerald T. Vento, a director of the company, recently bought at 22,000 shares at $23.07 each. With this buy, Mr. Vento increased his stake by 26.99% to 103,500 shares. Insiders now own close to 40% of the shares of VocalTec, which is very bullish.

Also very positive for VocalTec is the high level of institutional ownership at nearly 60%. For an institutional investor such as a mutual fund or pension fund, to invest in VocalTec is a very powerful show of strength for the company as its market cap is just over $500 million.

The balance sheet and income statement of VocalTec support this insider and institutional buying. For the next year, earnings-per-share growth is expected to rise by almost 30%, and the gross margin by 53.66%. The forward price-to-earnings ratio is 14.58.

VocalTec is also viewed very positively by the Wall Street analyst community. Now trading around $24.35, the mean analyst target price for VocalTec over the next year is $26.50. The mean analyst rating is very bullish at 1.50 (5 being the worst and 1 the best). The trend is definitely the friend of VocalTec shareholders as it's trading above its 20-day, 50-day and 200-day moving averages.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ, Inc.

This article appears in: Investing , Stocks

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