There is one reason insiders are buying into magicJack VocalTec


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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 Nasdaq, Inc.

This article appears in: Investing , Stocks

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