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The basic materials sector has been the worst-performing group YTD with a loss of 0.1%.

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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. Chesapeake Energy Corporation (NYSE:CHK) engages in the acquisition, exploration, development, and production of natural gas and oil properties in the United States.

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Insider buying by insider (last 30 days)

  • Thomas Ryan purchased 2,000 shares on May 21 and currently holds 5,000 shares or less than 0.1% of the company. Thomas Ryan has been a member of the Board of Directors since May 2013.
  • Louis Raspino purchased 25,000 shares on May 20-21 and currently holds 51,000 shares or less than 0.1% of the company. Louis Raspino has been a member of the Board of Directors since March 2013.
  • Archie Dunham purchased 450,000 shares on May 20 and currently holds 799,138 shares or 0.1% of the company. Archie Dunham has been the Non-Executive Chairman of the Board since June 2012.

Insider buying by calendar month

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

MonthInsider buying / sharesInsider selling / shares
May 2013477,0000
April 201300
March 2013087,500
February 201300
January 201300

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

Financials

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

Revenue$3.4 billion
Adjusted net income$183 million
Cash$33 million
Debt$13.4 billion

Outlook

The company continues to make progress toward its goal of completing $4.0-$7.0 billion of asset sales in 2013, having closed or signed approximately $2.0 billion of asset sales year to date.

The company's guidance for adjusted net income for full year 2013 is $1.0 billion to $1.16 billion.

Competition

Here is a table comparing Chesapeake Energy to the industry leaders.

CHK vs. Industry Leaders
StatisticIndustry LeaderCHKCHK Rank
Market CapitalizationONGC.BO2,780.11B14.45B40 / 559
P/E RatioGEEC.L5,320.75N/AN/A
PEG Ratio (5 yr expected)LRE46.410.2873 / 559
Revenue Growth (Qtrly YoY)ATH.TO488.10%41.50%69 / 559
EPS Growth (Qtrly YoY)EPL1811.50%N/AN/A
Long-Term Growth Rate (5 yr)MPO.AX100.00%51.90%12 / 559
Return on EquityPBT6286.08%-2.65%177 / 559
Long-Term Debt/Equity  75.669N/A
Dividend Yield (annual)WHZ18.80%1.60%35 / 559

Chesapeake Energy's revenue growth has been above the industry average.

My analysis

There have been three different insiders buying the shares and there have not been any insiders selling the shares during the last 30 days. The company has an insider ownership of 1.27%. There are nine analyst buy ratings, 20 neutral ratings and two sell ratings, with an average target price of $24.61. The stock is trading at a forward P/E ratio of 10.78. The company has a book value of $23.46 per share and the stock has a dividend yield of 1.62%. I believe the stock could be a good pick below the book value.

2. IAMGOLD Corporation (NYSE:IAG) engages in the exploration, development, and operation of mining properties. Its products include gold, silver, niobium, and copper deposits.

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Insider buying by insider (last 30 days)

  • Richard Hall purchased 4,000 shares on May 15 and currently holds 8,900 shares or less than 0.1% of the company. Richard Hall was newly appointed a director of IAMGOLD on March 22, 2012.
  • Benjamin Little purchased 3,000 shares on May 17 and currently holds 11,903 shares or less than 0.1% of the company. Benjamin Little is Senior Vice President, Corporate Affairs.
  • Jeffery Snow purchased 1,000 shares on May 22 and currently holds 97,167 shares or less than 0.1% of the company. Jeffery Snow joined IAMGOLD in November 2009 and is currently Senior Vice President and General Counsel in addition to being member of the Executive Leadership Team.

Insider buying by calendar month

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

MonthInsider buying / sharesInsider selling / shares
May 20138,0000
April 201300
March 2013146,1080
February 201385,0880
January 2013913,050

There have been 239,287 shares purchased and 3,050 shares sold by the insiders this year.

Financials

The company reported the first-quarter financial results on May 7 with the following highlights:

Revenue$305.3 million
Net income$10.9 million
Cash$863.3 million
Debt$639.2 million
Gold production188,000 ounces
Cash costs$787 per ounce
Proven & Probable gold reserves11.3 million ounces

Outlook

The company's outlook for 2013 is as follows:

Gold production875,000 - 950,000 ounces
Cash costs$850-$925 per ounce
Total all-in sustaining costs$1,200 - $1,300 per ounce

Competition

IAMGOLD's competitors include Barrick Gold (NYSE:ABX), Newmont Mining (NYSE:NEM) and Randgold Resources (NASDAQ:GOLD). Here is a table comparing these companies.

CompanyIAGABXNEMGOLDIndustry Average
Market Cap:1.91B19.18B15.90B6.82B3.93B
Employees:5,80028,15516,4002,0482.05K
Qtrly Rev Growth (yoy):-0.14-0.06-0.190.220.11
Revenue:1.62B14.34B9.36B1.37B1.21B
Gross Margin:0.410.460.540.450.48
EBITDA:653.80M5.96B3.92B700.49M169.32M
Operating Margin:0.30-0.080.300.390.21
Net Income:226.40M-857.00M1.64B412.07MN/A
EPS:0.60-0.863.294.440.12
P/E:8.47N/A9.7316.6618.45
PEG (5 yr expected):3.121.16-0.521.951.04
P/S:1.191.361.715.114.34

IAMGOLD is trading below the industry average P/S and P/E ratios, which could explain some of the insider buying.

My analysis

There have been three different insiders buying the shares and there have not been any insiders selling the shares during the past 30 days. There are four analyst buy ratings, five neutral ratings and two sell ratings with an average target price of $13.80. The stock is trading at a P/E ratio of 8.47 and a forward P/E ratio of 7.06. The company has a book value of $9.90 per share and the stock has a dividend yield of 4.92%. I have a long position in the stock currently.

3. Tallgrass Energy Partners, LP (NYSE:TEP) focuses on the ownership, acquisition, development, and operation of various midstream energy assets in North America.

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Insider buying by insider (last 30 days)

  • George Rider purchased 2,500 shares on May 17 pursuant to the initial public offering. George Rider currently holds 2,500 shares or less than 0.1% of the company. George Rider is Executive Vice President, General Counsel and Secretary of the company.
  • Jeffrey Ball purchased 20,000 shares on May 17 pursuant to the initial public offering. Jeffrey Ball currently holds 20,000 shares or less than 0.1% of the company. Jeffrey Ball has served as a director of the general partner since February 2013.
  • John Raymond purchased 100,000 shares on May 17 pursuant to the initial public offering. John Raymond currently holds 100,000 shares or 0.4% of the company. John Raymond has served as a director of the general partner since February 2013.
  • Gary Brauchle purchased 7,000 shares on May 17 pursuant to the initial public offering. Gary Brauchle currently holds 7,000 shares or less than 0.1% of the company. Gary Brauchle is Executive Vice President, Chief Financial Officer and Treasurer of the company.
  • David Dehaemers purchased 150,000 shares on May 17 pursuant to the initial public offering. David Dehaemers currently holds 150,000 shares or 0.6% of the company. David Dehaemers has been a director and President and Chief Executive Officer of the general partner since February 2013.
  • Richard Bullock purchased 4,500 shares on May 17 pursuant to the initial public offering. Richard Bullock currently holds 4,500 shares or less than 0.1% of the company. Richard Bullock is Vice President, Human Resources, Tax & Risk Management of the company.

Insider buying by calendar month

Here is a table of Tallgrass Energy Partners' insider trading activity by calendar month.

MonthInsider buying / sharesInsider selling / shares
May 2013284,0000
April 201300
March 201300
February 201300
January 201300

The company had its IPO in May.

Financials

The company reported the pro forma full year 2012 financial results with the following highlights:

Revenue$255.6 million
Net income$39.1 million
Net debt$231.1 million
Net tangible book value$9.61 per share

Outlook

Natural gas continues to be a critical component of energy supply and demand in the United States. Recently, the price of natural gas has been at historically low levels, with the prompt month NYMEX natural gas futures price reaching $4.07 per MMBtu as of March 14, 2013, compared to a high of $8.27 per MMBtu on January 29, 2008. The lower price of natural gas is due primarily to increased production, especially from unconventional sources such as natural gas shale plays, high levels of natural gas in storage, warm winter weather and the lingering effects of the economic downturn starting in 2008. In response to lower natural gas prices, the number of natural gas drilling rigs has declined from approximately 1,347 as of December 26, 2008 to approximately 431 as of December 28, 2012 according to Baker Hughes, as a number of producers have curtailed their exploration and production activities. Tallgrass Energy Partners believes that until the supply overhang has been reduced and the economy sees more robust growth, natural gas pricing is likely to be constrained.

Competition

Tallgrass Energy Partners' principal competitors in its natural gas transportation and storage market include companies that own major natural gas pipelines, such as Kinder Morgan (NYSE:KMP) and Southern Star Central Gas Pipeline, Inc., many of whom also have existing storage facilities connected to their transportation systems that compete with Tallgrass Energy Partners' storage facilities.

Tallgrass Energy Partners also experiences competition in the natural gas processing business. Tallgrass Energy Partners' principal competitors for processing business include other facilities that service its supply areas, such as the other regional processing and treating facilities in the Greater Powder River Basin which include plants owned and operated by Kinder Morgan, Merit Energy Company and Western Gas Partners, L.P. (NYSE:WES).

In addition, as a provider of midstream services to the natural gas industry, Tallgrass Energy Partners generally competes with other forms of energy available to consumers, including electricity, coal, propane and fuel oils.

My analysis

The stock started trading on May 14 after the IPO. There have been six different insiders buying the shares and there have not been any insiders selling the shares since the IPO. Tallgrass Development, LP and its affiliates own approximately 66% of Tallgrass Energy Partners. The stock is trading at a P/E ratio of 22.95 and the stock has a dividend yield of 5.2%. I have a cautiously bullish bias for the stock currently based on the intensive insider buying.

Disclosure: I am long IAG. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.