Insiders made noteworthy buys (see definition below) in one plunging mining stock and one surging energy stock this past week (May 21 to 25), and noteworthy buys and sells in several other basic materials and energy companies.
Insider buys, especially unusually large ones, in such stocks that are beaten down and trading near their lows, may give bulls comfort that the long-term fundamentals may be intact and that a turn may be under way in the next couple of quarters. Sells, on the other hand, at depressed prices after the plunge may lend even further credence to the bear thesis. Similarly, noteworthy buys in surging stocks may give investors some confidence that knowledgeable insiders are finding value at such elevated prices after a strong surge.
The transactions in this article were selected based on a review of over 1,600 separate SEC Form 4 (insider trading) filings last week, as part of our daily and weekly coverage of insider trades. The filings are noteworthy based on the dollar amount sold, the number of insiders buying or selling, and based on whether the overall buying or selling represents a strong pick-up based on historical buying and selling in the stock:
Golden Star Resources (GSS): GSS is a Canadian international gold mining and exploration company producing gold in Ghana, West Africa. Last week, nine insiders filed SEC Forms 4 indicating that they purchased 537,000 shares for $0.52 million, with the large majority of shares purchased by Directors Christopher Thompson (200,000), Craig Nelsen (100,000) and Robert Doyle (100,000). In comparison, insiders purchased a total of 0.68 million shares in the past two years.
GSS shares have suffered sharp declines recently, dropping by about 30% in the last two weeks, including an intraday low of 90 cents, well below prices approaching $1.50 two weeks ago. The sharp plunge came in the days prior to and following the company announcement that it had entered into a debenture purchase and exchange agreement on May 18 before the market open. Earlier, on May 10, the company reported its Q1 (March), indicating that it missed on revenues but beat analyst earnings estimates (4 cents vs. 2 cents), while also reiterating its guidance for the year.
The sharp decline prompted the company on Tuesday to make the unusual move of issuing a press release commenting on its recent price action, defending that there were no undisclosed material events at the company that would support the price decline. Absent that, it simply seems that traders were unhappy with the new debt agreements, and that coupled with the recent decline in the price of gold may have caused the decline, accelerated perhaps by a perceived technical failure on the chart as prices failed to penetrate the 50-day moving average to the upside. GSS shares are currently at their lows, and trade at a cheap 5 forward P/E, and at 0.6 P/B compared to the average of 1.4 for small-cap junior gold miners.
Enterprise Products Partners (EPD): EPD is a MLP engaged in transportation, gathering, processing and storage of natural gas, natural gas liquids and crude oil. Last week, Director Richard Snell filed SEC Form 4 indicating that he purchased 2,000 shares for $96.936, increasing his holdings to 11,797 shares. In comparison, insiders purchased 8,600 shares in the past year. It should also be noted that last week Group SVP Thomas Zulim sold 20,000 shares, ending with 0.30 million shares after the sale; however, insider selling at EPD is not as noteworthy given that shares have been up significantly recently. It is the purchase that is noteworthy, given that EPD shares currently trade near all-time highs, up about 20% in the past year and almost tripling from the 2008-09 lows earlier at its highs at the beginning of May.
EPD shares currently trade at 18-19 forward P/E and 3.6 P/B compared to averages of 19.3 and 2.6 for its peers in the oil and gas transportation and pipelines group, while earnings are projected to rise modestly from $2.38 in 2011 to $2.67 in 2013. The analyst community is very bullish about the stock, with 19 of the 22 analysts that cover it rating it at buy/strong buy, with the remaining three at hold, and putting a mean price target on it in the $56-$57 range.
In addition to the above two, insiders also reported noteworthy buys this past week in the basic materials and energy sectors in:
- Diamond Offshore Drill (DO), that is one of the largest deepwater offshore oil and gas drilling company with a fleet deployed worldwide in the waters of six of the world's seven continents, in which two insiders filed SEC Forms 4 indicating that they purchased 6,000 shares for $0.36 million, in comparison to only an additional 1,000 shares purchased by insiders in the past two years;
- Lyondellbasell Industries NV (LYB), that is a Netherlands-based manufacturer of polypropylene compounds, propylene oxide, polyethylene, ethylene and propylene, in which Director Jagjeet Bindra purchased 1,500 shares for $57,314, in comparison to 20,592 shares purchased by insiders in the past year;
- Newfield Exploration (NFX), that is an independent oil and gas company engaged in the exploration and development of crude oil and natural gas properties in the U.S., Malaysia and China, in which VP Daryll Howard purchased 1,000 shares for $30,010, the only insider purchase at least in the past two years; and
- Hollyfrontier (HFC), an independent petroleum refiner and marketer in the U.S., that is engaged in the production of high value light petroleum products such as gasoline, diesel fuel, jet fuel, and other specialty products, in which Director Franklin Myers purchased 700 shares for $20,429, in comparison to 15,362 shares purchased by insiders in the past two years.
On top of these names, insiders also reported noteworthy sales last week in the basic materials and energy sectors in:
- Cheniere Energy (LNG), an operator of LNG receiving terminals and natural gas pipelines in the Gulf Coast of the U.S., in which two insiders filed SEC Forms 4 indicating they sold 0.20 million shares for $3.0 million, in comparison to 0.56 million shares sold by insiders in the last six months; and
- Denbury Resources (DNR), engaged in the acquisition, exploration, development and operation of oil and gas properties in the Gulf Coast region, in which Director Gareth Roberts sold 15,000 shares for $0.23 million, in comparison to 96,183 shares sold by insiders in the past year.
Sources: Fundamental data in this article and company descriptions are based on SEC filings, Zacks Investment Research, Yahoo, Thomson Reuters and Briefing.com. The information and data is believed to be accurate, but no guarantees or representations are made.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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