Almost every investor should have some exposure to the oil and energy sector. Demand for oil is constant and will continue to grow with the global population. While the market has seen a rapid rise in the last few weeks, there are still undervalued oil stocks in which even insiders are buying.
Insider buying can provide great insight into where a stock might be heading. Insiders usually know their companies better than the average investor or stock analyst, so when they use their own money to buy shares, it can be very meaningful. Some of these stocks are near the lows for the past year, and look like great buying opportunities. Others look like potential trades. I have provided links for each stock which verifies the insider buying filed with the SEC below. Here are some stocks with notable insider buying in 2012:
Hess Corporation (HES) is a New York-based integrated oil and natural gas company. This company has significant oil reserves which at the end of 2011 totaled about 1,573 million barrels of oil. The stock currently trades at about $60 per share which is well below the 52 week high of $87.40. The company had significant expenses in 2011 that were related to a refinery shut-down, but that is out of the way now. Hess looks undervalued based on earnings estimates which are at $8.06 for 2012. The dividend is 40 cents per share which is equivalent to a .7% yield. On January 30, 2012, John Hess, the CEO bought about 91,250 shares, which is worth about $5 million.
Miller Energy Resources (MILL) is a independent oil and gas drilling and exploration company based in Tennessee. This is a smaller company that is pursuing fast growth. Miller reported a 63% rise in revenues in the most recent quarter, however the company also reported a net loss of about $4.5 million. These shares currently trade for about $3.90 which is nearly half the 52 week high of $8.04. Miller is expected to post a loss for 2011 and 2012, so the shares are more speculative. However, the stock looks undervalued based on the growth prospects and book value which is $7.29 per share. On January 27, 2012 an insider (Merrill McPeak, a director) bought 10,000 shares.
Exco Resources, Inc. (XCO) is a Texas-based onshore oil and natural gas company. This stock has been slammed and recently hit new 52 week lows at $6.80 over concerns about weak natural gas prices. This company has some interesting people involved in its operations. World famous oil investor T. Boone Pickens is a member of the board and owns stock in the company. At only $6.98 per share the stock looks deeply undervalued. The company is profitable and the book value is $8.07 per share. XCO pays a dividend of 16 cents per share which is equivalent to a 2.2% yield. It might take time for this stock to rebound, but buying the current dip is likely to reward investors eventually. An insider (Wilbur Ross, an owner of more than 10% of the company) recently purchased over 400,000 shares.
Linn Energy, LLC. (LINE) is a Texas-based oil and natural gas company with projects in a number of states which includes Kansas, Louisiana, California and others. It also has interests in the high-potential Permian Basin range. This stock is currently trading about 12% below the 52 week high of $41.13. Book value is stated at $21 per share. The company is solidly profitable and earnings estimates indicate a profit of $1.83 per share for 2011 and $2.25 for 2012. Linn Energy shares look undervalued based on the high-yield it offers. This stock pays a dividend of $2.76 per share which is equivalent to a 7.3% yield. On January 30, 2012, a director named Terrence Jacobs, filed reports showing a buy of 5,000 shares in a transaction worth about $124,000.
The data is sourced from Yahoo Finance and Insidercow.com. The information and data is believed to be accurate, but no guarantees or representations are made. Rougemont is not a registered investment advisor and does not provide specific investment advice. The information contained herein is for informational purposes only.
Disclosure: I am long XCO.