Regular readers of mine know that Mondays are dedicated to perusing the top 20 insider buy list provided every weekend in Barron's, a widely followed industry magazine. I have found this list is a good starting place to look for undervalued shares that insiders and beneficial owners are accumulating. This is especially true at these levels in the market, where the vast majority of insider activity is on the sell side.
This week, a couple of energy partnerships make the top 15 of this insider purchase list. For income investors looking for high distribution yields that are comfortable with this tax complexity of these entities, both should be considered for inclusion into an income portfolio.
Atlas Resource Partners (NYSE:ARP) is a master limited partnership (MLP) active in oil and gas production in the Barnett Shale in Texas, the Appalachian Basin and in the Mississippi Lime in Oklahoma. ARP owns an interest in over 8,600 producing natural gas and oil wells, representing over 700 Bcfe of net proved developed reserves.
Noted valued investor and beneficial owner Leon Cooperman continues to add to his substantial stake in the partnership. Mr. Cooperman added another ~$2.2mm to his position in the firm in the last reported trading week. He has been a frequent buying this year, as this was his third transaction over $500K so far in 2014.
Atlas has a huge distribution yield (10.9%) at current prices. The company has increased its payouts some 40% since coming public in 2012 in an incremental fashion. It moved to monthly payouts earlier in the year.
Revenues should increase some 45% year-over-year in FY2014, and analysts have another 20% rise projected for FY2015 currently. The ten analysts that cover the shares have a $24.50 a share price target on Atlas, ~15% above its current stock price.
Vanguard Natural Resources (NYSE:VNR) focuses on making accretive acquisitions of natural gas and oil properties in the known producing basins of the continental United States characterized by a high percentage of producing reserves, long-lived, stable production and step-out development opportunities. The limited partnership has a significant footprint in Texas, including in the Permian Basin.
Vanguard has a high-quality, long-lived reserve base with predictable decline rates and an estimated reserve life of approximately 15 years. The company has years of development opportunity due to its inventory of low-risk, low-cost development drilling locations.
An insider recently made a better than $160K purchase. It was the first insider buy since early last summer. The shares provide a generous distribution yield (8.3%). The company has incrementally and consistently raised its payout since coming public in 2007. It went to a monthly payout in the summer of 2012.
Consensus earnings estimates for both FY2014 & FY2015 have moved up nicely and consistently over the past three months. Earnings should grow 50% or better year-over-year this fiscal year on a projected ~40% rise in revenues. Current projections call for a ~15% earnings rise on a ~10% rise in sales in FY2015.
Investors should also do their own due diligence, but these two partnerships seem worthy of further discovery for income-orientated investors.
Disclosure: I am long ARP. 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.