A good investor spends hours and hours of research during the week in order to find an edge. Earnings transcripts, investor presentations, analyst reports as well as other sources should be scoured if an investor is truly focused on finding alpha. If one does not have the time or volition to do so should probably allocate their funds into a low cost index fund.
I have a variety of sources for new investment ideas and one of my favorites is the top 20 insider buys & sells list put out weekly by the widely followed industry magazine Barron's. Not only can it be a great place for initiating research on stocks insiders are buying but can provide insight on what segments of the market insiders are selling as well.
This week saw a couple of social media stars see more than $20mm sales despite their recent drops as insiders at Facebook (NASDAQ:FB) and Zillow (NASDAQ:Z) hitting the top ten insider sells this week. On the contrary, high yield energy partnerships with reasonable valuations are attracting insider interest. Here are two that caught my eye.
Lehigh Gas Partners LP (LGP) is a distributor of branded petroleum for motor vehicles in the United States. They have a network of almost 800 gas station locations in 12 states: Pennsylvania, New Jersey, New York, Ohio, Kentucky, Massachusetts, Maine, New Hampshire, Florida, Tennessee, Virginia and Georgia.
A director has picked up over $1mm in new shares since mid-May in three separate transactions. This is the first insider transactions during 2014 and follows several purchases by other insiders in the back of 2013 in similar price ranges.
This entity came public in 2012 and has incrementally raised its payout in that time and now yields 7.8%. As such it has a significantly higher than others in the same space such as Global Partners (NYSE:GLP) which has a yield of 6.1%. Atlas' revenues should increase over 20% year-over-year in 2014 and the price targets by the six analysts that cover the equity range from $30 to $33 a share. The stock currently trades for $26.25 a share.
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.
Atlas is a core part of my income portfolio and has been popping up on the top insider buy list throughout 2014. Two insiders have added to this tally since mid-May by making three purchases totaling nearly $1.2mm.
This partnership has steadily increased payouts since coming public in 2012 and moved to a monthly payout earlier in the year. The shares yield almost twelve percent (11.7%) at current prices. This entity is growing rapidly via strategic purchases and consensus earnings estimates for both FY2014 & FY2015 have moved nicely up over the past month. Famed value investor Leon Cooperman is also a beneficial owner in the partnership.
I am currently overallocated to this high yielding sector as I think there is good growth opportunities given the country is still in the early innings of a domestic energy boom. Given my outlook for only single digit gains in the overall market in 2014, I also believe these high yield plays will be outperformers during this year.
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.