The current volatility in the market has left many promising stocks trading near their lows. We mined through the over 6,000 insider transactions filed on SEC Forms 3, 4, and 5 by insiders in the month of December, and crossed them with stocks currently trading at their lows, many at valuations much cheaper than their peers, to identify the following candidates. These are stocks that while trading at their lows and down strongly in the past year, nevertheless, are seeing unusual insider buying by multiple insiders signaling perhaps that a bottom may be near (you can follow us or refer to our author page for more current daily updates on significant insider and institutional filings):
Cobalt International Energy (CIE): CIE is engaged in the exploration and production of oil primarily in the deepwater of the U.S. Gulf of Mexico, and in offshore Angola and Gabon in West Africa. In December, three insiders sold a total of 0.48 million shares for $7.1 million. The selling insiders included Chief Exploration Officer James Farnsworth, COO Van Whitfield and VP Lynne Hackedorn. Prior to December, the last time insiders sold CIE shares was in July, and overall they sold a total of 2.6 million shares in the past year, implying that in December, they sold at a rate two and a half times compared to the rest of the year. The majority of the shares (320,000) were sold by Chief Exploration Officer Farnsworth, ending with 1.99 million shares after the sale.
CIE has been up strongly recently, having almost doubled since mid-December when it started reporting positive major developments in its activities in West Africa. First, in mid-December, Diamond Offshore (DO) disclosed in its 8-K that CIE had extended a $360,000/day lease for DO's Confidence oil rig, indicating that the rig was being used to search for crude oil in Angolan waters. And then two weeks ago, CIE reported signing a deal with Angola's government to explore for oil off its coast, which was followed by even more positive news when Goldman added CIE to its "Americas Buy" list and raised its price target of $21 from $14, well above where it traded at that time. While it is understandable and perhaps even prudent that insiders would unload some of their shares with the stock up so strongly recently, it does indicate that the rally may be over-done in the short-term and that the stock is likely to consolidate before making any further moves to the upside. Going forward, it will be interesting to see if this accelerated insider selling persists early in the first few months of this year.
Gran Tierra Energy Inc. (GTE): GTE is a Canadian oil and gas exploration and production company engaged in exploration activities in Colombia, Argentina, Peru and Brazil. In December, two insiders sold a total of 0.87 million shares for $4.36 million. A large majority of the shares sold (807,500) were by CEO Dana Coffield, who acquired those shares after exercising options, and he held 1.85 million shares after the sale of those shares. The remaining 60,000 shares were sold by COO Shane O'leary (60,000 shares), who also acquired those by exercising options, and he ended with no direct holdings (and 9,300 shares in indirect holdings) in GTE after the sale.
Furthermore, overall insiders sold only an additional 0.19 million shares in the remainder of the past year. This unusual and heavy insider selling is especially significant given that GTE currently trades near its lows, down almost 40% in 2011, a correction much steeper than its peers in the oil & gas exploration & production group. Also, it trades at a discount 8-9 forward P/E and 1.2 P/B compared to averages of 15.2 and 1.5 for the Canadian Exploration and Production group, which would imply that insiders should find shares attractive at these levels. However, the company has missed on its revenue and/or earnings estimates in each of the last four quarters.
Murphy Oil Corp. (MUR): MUR is engaged in the exploration, production, refining and marketing of oil and gas in the U.S. and U.K. In December, four insiders sold a total of 79,300 shares for $4.4 million. The majority of the shares were sold by Director Steven Cosse (40,000 shares), who acquired those shares after exercising options, and he held 62,679 shares following the sale (plus another 10,682 shares in indirect holdings). Another 15,000 shares each were sold by SVP's John Eckart and Kevin Fitzgerald, with both insiders acquiring those shares from exercising options.
After sale, SVP Eckart held 20,675 shares (plus another 7,250 shares in indirect holdings), and SVP Fitzgerald held 24,252 shares (plus another 1,970 shares in indirect holdings). Thus, the shares sold were a significant portion of the insider's holdings in the company. Furthermore, insiders sold only a total of 0.15 million shares in the last three months and 0.56 million shares in the past year, so the insider selling in December represented a strong pickup at a rate twice that of the rest of the year. MUR shares currently trade at 9-10 forward P/E, and at 1.2 P/B, compared to averages of 8.0 and 1.2 for the U.S. integrated oil and gas group.
Quicksilver Resources (KWK): KWK is engaged in the exploration and production of oil, natural gas and natural gas liquids in TX, CO, WY, MT, Alberta and British Columbia. It focuses primarily on unconventional reservoirs in fractured shales, coal beds, and tight sands. In December, two insiders sold a total of 75,529 shares for $0.62 million. The majority were sold by SVP of US Operations Stan Page (68,830 shares), who acquired those shares after exercising options, and he held 139,512 shares (plus another 12,486 shares in indirect holdings) following the sale. Furthermore, the sale is significant also given that insiders sold only an additional 12,542 shares in the past year (buying none).
Denbury Resources (DNR): DNR is engaged in the acquisition, exploration, development and operation of oil and gas properties in the Gulf Coast region. In December, two insiders sold a total of 83,183 shares for $1.38 million. The selling insiders included VP Raymond Dubuisson (63,183 shares) and Director Gareth Roberts (20,000 shares). VP Dubuisson ended with 146,637 shares after the sale, so the shares sold were a significant portion of his holdings in the company. Furthermore, the last insider sale prior to December was in March, and over the last year insiders sold a total of 540,811 shares, so that the selling in December represented a strong pickup at almost twice the average rate for the rest of the year. DNR shares trade at discount 13-14 forward P/E, and at 1.4 P/B, compared to averages of 21.5 and 5.3 respectively for the U.S. oil & gas exploration & production group.
Other major sales in the energy sector in December included a $0.86 million sale at independent energy exploration and development company Kodiak Oil & Gas (KOG); a sale of $4.2 million by two insiders in Western Refining Inc. (WNR), a refiner and marketer of crude oil and refined products in West TX, AZ, NM, UT, CO and the mid-Atlantic region; and a $4.6 million sale by four insiders at Oasis Petroleum Inc. (OAS), an independent oil & gas exploration & production company with activities, mainly in the Williston Basin in MT and ND.
Credit: Fundamental data in this article were based on SEC filings, I-Metrix® by Edgar Online®, Zacks Investment Research, Thomson Reuters and Briefing.com. The information and data is believed to be accurate, but no guarantees or representations are made.
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Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.