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The basic materials sector has been the worst-performing group over the recent one-year period with a gain of 6.3%.

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In this article I will feature three basic materials stocks that have seen intensive insider buying during the last 30 days. Intensive insider buying can be defined by the following three criteria:

  1. The stock is purchased by three or more insiders within one month.
  2. The stock is sold by no insiders in the month of intensive purchasing.
  3. At least two purchasers increase their holdings by more than 10%.

1. Walter Energy (NYSE:WLT) produces and exports metallurgical coal for the steel industry.

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Insider buying by insider (last 30 days)

  • Joseph Leonard purchased 16,700 shares on May 6 and currently holds 23,984 shares or less than 0.1% of the company. Joseph Leonard serves as a director of the company.
  • Bernard Rethore purchased 10,000 shares on May 6 and currently holds 19,244 shares or less than 0.1% of the company. Bernard Rethore serves as a director of the company.
  • Jerry Kolb purchased 2,835 shares on May 6 and currently holds 14,690 shares or less than 0.1% of the company. Jerry Kolb serves as a director of the company.
  • Charles Stewart purchased 3,000 shares on May 7 and currently holds 37,378 shares or less than 0.1% of the company. Charles Stewart is Senior Vice President, Project Development, at Walter Energy.
  • Walter Scheller purchased 8,585 shares on May 6 and currently holds 48,291 shares or less than 0.1% of the company. Walter Scheller was appointed Chief Executive Officer of Walter Energy in September 2011.
  • Earl Doppelt purchased 5,000 shares on May 6 and currently holds 30,184 shares or less than 0.1% of the company. Earl Doppelt was named Senior Vice President, General Counsel and Secretary, of Walter Energy in January 2012.
  • Mary Henderson purchased 2,000 shares on May 6 and currently holds 4,503 shares or less than 0.1% of the company. Mary Henderson serves as a director of the company.
  • William Harvey purchased 5,000 shares on May 6 and currently holds 13,377 shares or less than 0.1% of the company. William Harvey was named Chief Financial Officer for Walter Energy in July 2012.
  • David Beatty purchased 5,000 shares on May 6 and currently holds 19,057 shares or less than 0.1% of the company. David Beatty serves as a director of the company.

Insider buying by calendar month

Here is a table of Walter Energy's insider trading activity by calendar month.

MonthInsider buying / sharesInsider selling / shares
May 201358,1200
April 201300
March 201300
February 201300
January 201300

The month of May has seen all of the insider buying this year.

Financials

The company reported the first-quarter financial results on May 1 with the following highlights:

Revenue$491.3 million
Net loss$49.4 million
Cash$235.8 million
Debt$2.6 billion

Outlook

  • Sales price per ton for met coal is expected to be slightly higher in the second quarter compared with the first quarter, with met coal sales volumes expected to be in line with the first quarter.
  • The company expects to lower its per ton met coal cost of production and cost of sales in the second quarter of 2013 by more than 5%.
  • Overall earnings, adjusted EBITDA and cash flows are expected to significantly improve in the second quarter compared to the first quarter.

Competition

Walter Energy's competitors include Consol Energy (NYSE:CNX) and Westmoreland Coal (NASDAQ:WLB). Here is a table comparing these companies.

CompanyWLTCNXWLBIndustry Average (Industrial Metals & Minerals)
Market Cap:1.06B7.97B173.11M39.01B
Employees:4,1008,8961,25069.38K
Qtrly Rev Growth (yoy):-0.22-0.090.100.54
Revenue:2.24B4.93B614.65M46.58B
Gross Margin:0.200.270.210.43
EBITDA:278.86M860.04M86.33M7.15B
Operating Margin:-0.040.050.010.11
Net Income:-1.16B289.71M-11.83MN/A
EPS:-18.391.27-0.84N/A
P/E:N/A27.44N/A14.14
PEG (5 yr expected):-1.573.03N/A0.45
P/S:0.471.610.281.91

Walter Energy is trading below the industry average P/S ratio, which could explain some of the insider buying.

My analysis

There have been nine different insiders buying the shares and there have not been any insiders selling the shares during the last 30 days. There are 10 analyst buy ratings, 11 neutral ratings and three sell ratings, with an average target price of $34.20. The stock is trading at a forward P/E ratio of 18.49 and the company has a book value of $15.12 per share. The stock could be a good pick at the book value.

2. Trevali (OTCQX:TREVF) is a zinc-focused base metals development company with active operations in Canada and Peru.

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Insider buying by insider (last 30 days)

  • Mark Cruise purchased 4,000 shares on April 18-19 and currently holds 490,000 shares or 0.2% of the company. Mark Cruise is President, CEO and Director of the company.
  • Catherine Gignac purchased 50,000 shares on May 3 and currently holds 100,000 shares or less than 0.1% of the company. Catherine Gignac serves as a director of the company.
  • David Huberman purchased 100,000 shares on April 25-30 and currently holds 100,000 shares or less than 0.1% of the company. David Huberman serves as a director of the company.
  • Edward Stakiw purchased 4,000 shares on April 18-24 and currently holds 100,000 shares or less than 0.1% of the company. Edward Stakiw is a senior officer of the company.
  • Erin Walmesley purchased 8,500 shares on April 11-25 and currently holds 135,934 shares or less than 0.1% of the company. Erin Walmesley is Corporate Secretary.

Insider buying by calendar month

Here is a table of Trevali's insider trading activity by calendar month.

MonthInsider buying / sharesInsider selling / shares
May 201350,0000
April 2013119,0000
March 20135,0000
February 201300
January 201300

There have been 174,000 shares purchased and zero shares sold this year.

Financials

The company reported the full year 2012 financial results on March 28 with the following highlights:

Revenue$0
Net loss$7.4 million
Cash$3.3 million
Debt$37.9 million

On April 30, Trevali announced that it had closed the $30-million of funding associated with its previously announced $60-million senior debt and prepaid precious metals facility with RMB Resources, the resource financing division of the FirstRand Group of South Africa.

Outlook

  • In Peru, the company is nearing production at its Santander zinc-lead-silver mine where commissioning is expected soon and subsequent ramp up to the planned 2,000-tonnes-per-day production is anticipated by mid-year 2013.
  • In Canada, Trevali owns the Caribou mine and mill, Halfmile mine and Stratmat polymetallic deposit all located in the Bathurst Mining Camp of northern New Brunswick. Initial trial production from the Halfmile underground mine was successfully undertaken in 2012 and the company anticipates commencing operations at its 3,000-tonne-per-day Caribou Mill Complex in early-2014.
  • The company expects that it will operate at a loss until its New Brunswick operations and Santander Projects both reach commercial production.

Competition

Trevali's business of the acquisition, exploration and development of mineral properties is intensely competitive. Trevali may be at a competitive disadvantage in acquiring additional mining properties because it must compete with other individuals and companies, many of which have greater financial resources, operational experience and technical capabilities than Trevali. Trevali may also encounter increasing competition from other mining companies in efforts to hire experienced mining professionals. Increased competition could adversely affect Trevali's ability to attract necessary capital funding or acquire suitable producing properties or prospects for mineral exploration in the future.

My analysis

There have been five different insiders buying the shares and there have not been any insiders selling the shares during the last 30 days. The management and insiders own approximately 4% of the company. The company has Indicated resources of 2.7 billion lbs Zn, 1 billion lbs Pb, 34.5 million ounces Ag and 109 million lbs Cu. Production startup in Peru is anticipated by mid-year 2013. Trevali has a book value of $1.05 per share. I have a long position in the stock currently.

3. Winstar Resources (OTC:WIXFF) explores for, develops, produces, and sells crude oil, natural gas, and natural gas liquids in Tunisia and Hungary.

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Insider buying by insider (last 30 days)

  • Jerrad Blanchard purchased 4,200 shares on April 29 and currently holds 9,200 shares or less than 0.1% of the company. Jerrad Blanchard assumed the role of Chief Financial Officer in January 2012.
  • Bruce Libin purchased 10,000 shares on April 25 and currently holds 10,000 shares or less than 0.1% of the company. Bruce Libin is Chairman of the Board.
  • MM Asset Management purchased 151,800 shares on May 2-3 and currently controls 3,963,500 shares or 11.1% of the company.
  • David Monachello purchased 14,000 shares on April 29 and currently holds 241,480 shares or 0.7% of the company. David Monachello is President and Director of the company.

Insider buying by calendar month

Here is a table of Winstar's insider trading activity by calendar month.

MonthInsider buying / sharesInsider selling / shares
May 2013151,8000
April 201328,2000
March 201300
February 201300
January 201300

The month of May has seen the most insider buying this year.

Financials

The company reported the full year 2012 financial results on March 13 with the following highlights:

Revenue$50.5 million
Net income$4.7 million
Cash$3.5 million

Outlook

The company's operations during the first quarter of 2013 remain focused on the restoration of production to full capacity and the testing of CS Sil #10, the results of which will be instrumental in determining future development and exploration plans for the Chouech Essaida concession. As previously announced,the company plans to commence drilling of the Sabria #12 location during the second quarter of 2013 subject to final board approval and social and political stability in the region. Future exploration and development activities at the Sabria concession will be contingent on the results of this well.

The company has entered into the second phase of its farm in agreement in Romania, which consists of the drilling of two exploration wells and the acquisition of 180 square kilometers of 3D seismic before May of 2015, to acquire a 60% interest in the Satu Mare concession. During 2013, the company expects to drill one exploration well with the aid of 3D seismic acquired in 2012 and processed during 2013 and acquire 80 square kilometers of 3D seismic.

News

On April 25, Winstar announced that it has entered into an arrangement agreement whereby Kulczyk Oil Ventures Inc. will acquire all of the issued and outstanding common shares of Winstar. Under the terms of the agreement, each Winstar shareholder will receive, for each Winstar share, at the shareholder's election: $2.50 in cash or 7.555 KOV ordinary shares, subject to a maximum of $35 million in cash being paid to Winstar shareholders in aggregate.

Competition

The oil and natural gas industry is highly competitive and Winstar must compete with many companies with greater financial strength and technical resources. Generally, there is intense competition for the acquisition of resource properties considered to have commercial potential. Prices paid for both oil and gas produced are subject to market fluctuations and will directly affect the profitability of producing any oil or gas reserves which may be acquired or developed by Winstar.

My analysis

There have been four different insiders buying the shares and there have not been any insiders selling the shares during the last 30 days. There are four analyst buy ratings, zero neutral ratings and zero sell ratings, with an average target price of $3.93. The stock is trading at a P/E ratio of 19.08 and a forward P/E ratio of 4.51. The company has a book value of $2.95 per share. Winstar received a buyout offer on April 25. I believe the stock is a good pick below the buyout offer price of $2.50 per share.

Source: 3 Basic Materials Small Caps With Recent Intensive Insider Buying