Insiders should be very reluctant to buy more shares of their company’s stock, since it leaves them more exposed to company-specific events and the principles of diversification state that it is rational to reduce this exposure. The exception would be if an insider is particularly bullish, and so insider purchases can serve as strong signals of this sentiment. We especially find consensus insider purchases interesting; stocks bought by multiple insiders tend to outperform the market (read our discussion of studies on insider purchases). Here are five energy stocks that multiple insiders have bought in the last three months:
Several insiders have been buying shares of Halcon Resources Corp (NYSE:HK), an oil and gas exploration and production company with most of its assets in the onshore U.S. (including acreage in Texas, Oklahoma, and Louisiana). See which insiders have been buying the stock. Halcon is down 30% in the last year, and we’d guess that many of these insiders believe that the market has overreacted to falling natural gas prices. While production increases have been good for revenue, the effect on earnings has not been as positive. Halcon trades at 15 times consensus earnings for 2013.
Drilling equipment and services company Weatherford International Ltd (NYSE:WFT) is another energy stock that insiders have been buying in the last few months. Billionaire Dan Loeb’s Third Point was also bullish on Weatherford in the third quarter of 2012, increasing the size of its position by 8% to a total of 4 million shares (check out Loeb’s stock picks). At a market cap of $10 billion, Weatherford’s current-year P/E is 13. Wall Street analysts expect earnings growth to continue over the next several years, generating a five-year PEG ratio of 0.7. We would note that earnings have been down, and also that the company is dependent on drilling activity and so is highly correlated to the broader market with a beta of 2.1.
Three more energy stocks insiders love: