Why Pacific Biosciences of California Shares Surged

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of genetic analysis company Pacific Biosciences of California surged as much as 14% today after an SEC filing on Thursday revealed that Chairman Michael Hunkapiller bought 200,000 shares on the open market.

So what: The stock has slid steadily since its disappointing third quarter in late September, but Hunkapiller's purchase suggests that he knows something specific that Wall Street doesn't or that he simply sees solid long-term value in the shares. After all, as legendary fund manager Peter Lynch once said, "Insiders might sell their shares for any number of reasons, but they buy them for only one: They think the price will rise."

Now what: While sales of Pacific's new gene sequencing system, PacBio RS II, are rather weak at the moment, shareholders could be rewarded handsomely for their patience.

"The good news for long-term investors is that Pacific Biosciences does enough cash on hand to keep the company afloat until 2016," noted my Foolish colleague George Budwell. "And the company looks like it will need the time to find an appropriate niche market for the PacBio RS II system."

When you couple Pacific's decent financial health with Hunkapiller's big buy, the stock looks like a particularly enticing speculation.