Analyzing Friday's Noteworthy Insider Trades In Basic Materials And Energy Sectors

Includes: APC, CLNE, GTE, SM, VLO, WNR
by: GuruFundPicks

We present here noteworthy buys and sells from Friday's (March 16th, 2012) SEC Form 4 (insider trading) filings in the basic materials and energy sectors, as part of our daily and weekly coverage of insider trades (noteworthy insider trades on Friday in the healthcare & tech, and other sectors can be accessed from our author page). These were selected by a review of over 360 separate SEC Form 4 transactions filed by insiders on Friday. 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 (for more info on how to interpret insider trades, please refer to the end of this article):

Andarko Petroleum Corp. (NYSE:APC): APC is one of the world's largest independent oil and gas exploration and production companies, with a majority of its reserves located in the U.S., in the mid-continent in KY, OK and TX, offshore in the Gulf of Mexico, and in AK. On Friday, Chairman & CEO James Hackett filed SEC Form 4 indicating that he exercised options and sold the resulting 234,937 shares for $19.9 million, ending the day with 0.16 million shares in direct and 0.13 million shares in indirect holdings (not including derivative holdings). Besides CEO Hackett, SVP Robert Daniels also filed an SEC Form 4 indicating that he sold 8,900 shares; that sale was exercised at the request of his ex-wife, with the shares having been previously transferred to her pursuant to a divorce decree. In comparison to the above sales, insiders sold 0.50 million shares in the past year.

APC shares rallied up strongly the prior week on Friday after the company announced that it had tentatively resolved a long-standing tax and production dispute with Algeria and its state oil company Sonatrach, under which APC will receive $1.8 billion worth of crude over 12 months once the deal is finalized. APC shares currently trade within striking range of all-time highs at 16-17 forward P/E and 2.3 P/B compared to averages of 18.1 and 5.2 for its peers in the U.S. oil & gas exploration & production group, while earnings are projected to increase from $3.38 in 2011 to $5.05 in 2013 at an annual growth rate of 22.2%.

Clean Energy Fuels Corp. (NASDAQ:CLNE): CLNE, founded by famed energy investor and hedge fund manager Boone Pickens, provides natural gas as an alternative fuel to vehicle fleets in the U.S. and Canada, including customers in the refuse, transit, shuttle, taxi, intrastate and interstate trucking, airport and municipal fleet markets. On Friday, three insiders filed SEC Forms 4 indicating that they sold 212,177 shares for $4.3 million. Of these, CFO Richard Wheeler exercised options and sold the resulting 105,000 shares for $2.1 million, and Chief Marketing Officer James Harger exercised options and sold 90,000 shares for $1.8 million, pursuant to a 10b5-1 plan. In comparison, insiders sold 2.5 million shares in the past year.

CLNE just reported a mixed Q4 on Monday, missing earnings (21c loss v/s 16c loss) and strongly beating revenues ($86 million v/s $73 million). Also, on Tuesday, the company received news of a failed Senate vote to grant tax breaks to natural gas trucks that initially sent its shares sharply lower. However, shares were back up to near their highs by the end of the week, backed by an overall investment thesis that still remains intact despite the mixed Q4 results, and external developments that continue to be bullish. These include a historic low in natural gas prices that is presenting opportunities to displace coal in electricity generation, and oil in the transportation sector, buoyed further by President Obama's announcement in his recent State of the Union speech of the intention (of the government) to push forward the use of natural gas-powered car development. At current prices, however, the stock is extended technically, and trades at an expensive 3.2 P/B and 4.8 PSR (price-to-sales). We believe it is likely that absent any new positive developments, the stock is likely to consolidate here, within shooting range of its all-time highs.

Valero Energy Corp. (NYSE:VLO): VLO is an independent petroleum refining and marketing company operating through three segments: refining, retail and ethanol. On Friday, EVP Jean Bernier filed SEC Form 4 indicating that he exercised options and sold the resulting 29,000 shares for $0.8 million, ending with 52,225 shares after the sale (not including derivative holdings). In comparison, VLO insiders sold 42,500 shares in the past year.

VLO is arguably the most undervalued company in the oil refining & marketing group, trading at a discount 6-7 forward P/E and 0.9 P/B compared to averages of 18.9 and 4.7 for its peers in the group. This even after the recent rally that has lifted shares almost 40% YTD. However, looking at a long-term chart, it is obvious that shares are still sloshing around at the lows, at about 1/3rd the price compared to the highs in 2007, while earnings are up strongly and the stock is approaching multi-year highs in the $30-$31 range. We believe that current fundamentals support the stock to at least approach those multi-year highs.

Western Refining Inc. (NYSE:WNR): WNR refines and markets crude oil and refined products in West TX, AZ, NM, UT, CO and the mid-Atlantic region. On Friday, Chairman of the Board and 10% owner Paul Foster filed SEC Form 4 indicating that he sold 200,000 shares in direct holdings and another 100,000 shares that he holds indirectly via Franklin Mountain Investments Ltd. Partnership, pursuant to a 10b5-1 trading plan, ending with 6.7 million shares in direct and another 17.9 million shares in indirect holdings in the company. In comparison, insiders sold 5.1 million shares in the past year. WNR shares trade at 7-8 forward P/E and 1.9 P/B compared to averages of 11.2 and 2.4 for its peers in the oil refining and marketing group.

On top of these, an additional large insider sale reported on Friday in the basic materials & energy sectors, included:

  • a $1.0 million sale by Director Barbara Baumann at SM Energy Co. (NYSE:SM), engaged in the exploration, production and acquisition of crude oil and natural gas in North America.

Furthermore, insiders also reported noteworthy buys on Friday in the basic materials & energy sectors, including:

  • Gran Tierra Energy Inc. (NYSEMKT:GTE), a Canadian oil and gas exploration and production company engaged in exploration activities in Colombia, Argentina, Peru and Brazil, in which Director Nicholas Kirton purchased 16,561 shares for $100,293, and in comparison GTE insiders purchased 46,561 shares in the past year.

Credit: Fundamental data in this article were based on SEC filings, Zacks Investment Research, Thomson Reuters and 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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