Most energy related stocks have seen nice gains lately, as oil has surged about 25% in the last several weeks. What makes the names below more interesting is that these companies have reported insider buying even as some of these stocks have been rising. The fact that insiders are buying these names could be a good sign that there is still significant upside potential in these names. Most companies report constant insider selling, so it is always notable to see insider buying.
I think exposure to oil is a must for investors in the long run. I have been positive on energy stocks for a long time, but due to the recent gains, I have been taking profits in certain names and I believe it makes sense to be selective when buying oil stocks now. I am waiting for a drop in oil prices and a general correction in energy stocks which could provide a strong buying opportunity in these and other energy stocks. I have provided links for each stock which verifies the insider buying filed with the SEC below. Here are the stocks:
Magnum Hunter Resources (MHR) is trading around $8.56. Magnum is an independent oil and gas company, based in Texas. These shares have traded in a range between $3.34 to $8.63 in the last 52 weeks. The 50 day moving average is $7.18 and the 200 day moving average is $5.58. MHR is estimated to earn about 11 cents per share in 2011 and 41 cents in 2012. You can see the recent insider buying here.
What Magnum insiders and other investors might be seeing: Magnum controls about 46,000 acres in the Marcellus Shale region as well as exposure to the Eagle Ford and Bakken. Oil stocks with exposure to the Bakken Range have surged. The CEO of one leading oil company says he thinks there are 20 BILLION (with a B) barrels of oil in the Bakken. Read about this estimate here. These shares are trading near the highs, so this stock might have further to run. Buying dips will probably pay off with this stock.
Kinder Morgan Inc. (KMI) is trading around $29.50. Kinder is an oil and gas pipeline company, based in Texas. These shares have traded in a range between $29.49 to $32.14 in the last 52 weeks. The 50 day moving average and the 200 day moving average is not available since KMI went public recently. KMI is estimated to earn about $1.06 per share in 2011 and $1.19 in 2012. You can see the insider buying here.
What Kinder insiders and other investors might be seeing: A number of analysts see some upside to the share price with targets at $33 and $33.50, which you can see here. Because these shares are trading at the lows after going public fairly recently, I think they are likely to drop further and would not consider buying until they are lower and/or found a solid bottom.
Martin Midstream Partners LP (MMLP) is trading around $39.91. Martin Midstream is a limited partnership in the oil and gas sector, based in Texas. These shares have traded in a range between $25.51 to $42.64 in the last 52 weeks. The 50 day moving average is $39.66 and the 200 day moving average is $34.48. MMLP is estimated to earn about $1.44 per share in 2011. You can see the insider buying here.
What Martin Midstream insiders and other investors might be seeing: Martin pays a generous dividend of $3.04 per share which is equivalent to a yield of 7.6%. Analysts see earnings estimates for MMLP rising from $1.44 to over $1.61 in 2012, as rising energy prices boost profits.
Vantage Drilling (VTG) shares are trading at $1.89. Vantage is an offshore drilling company. These shares have traded in a range between 99 cents to $2.26 in the last 52 weeks. The 50 day moving average is $1.95 and the 200 day moving average is $1.68. Earnings estimates indicate a profit of 10 cents per share for 2011. You can see the insider buying here.
What Vantage insiders and other investors might be seeing: This most recent insider buy was for less than $10,000 worth of shares so it doesn't mean much. Vantage has been losing money and the company now has many shares outstanding due to dilution. According to Yahoo Finance, VTG has nearly 300 million shares outstanding which is too many for a small company like this.
As I have said in the past, without a reverse stock split, it seems unlikely these shares will trade for over $5 per share. If these shares corrected to about $1.50 or less, I think that would price in the possibility of a reverse stock split and represent a decent speculation. The main issue is the very heavy debt loads this company carries as it tries to compete with the likes of well capitalized and much larger competitors. VTG is paying very high interest rates on a heavy debt load while competitors have much better capital structures and can borrow money at much lower rates. I like the company, but I don't like the capital structure of VTG. The high debt levels adds significant risk and limits the upside.
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.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I am not a registered investment advisor and do not provide specific investment advice. The information contained herein is for informational purposes only.
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