An Insider Bought Occidental Petroleum, Should You?

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According to a filing with the SEC, Avedick Poladian bought 5,000 shares of Occidental Petroleum Corporation (NYSE:OXY) on December 4th at an average price of $73.43 per share. Poladian, who serves as COO of real estate company Lowe Enterprises, is a member of Occidental’s Board of Directors and after his most recent purchase owns a total of 30,000 shares of the company’s stock. Insider trading filings, particularly insider purchases, can be good to track as studies show that stocks bought by insiders tend to outperform the market on average (read more about studies on insider trading).

The $61 billion market cap oil major had its sales decline very slightly in the third quarter of 2012 versus levels from Q3 2011. Slightly higher production was offset by lower prices for natural gas and natural gas liquids. The higher production also caused cost of sales and SGA expenses to come in higher, with the result being that Occidental’s net income was down 22%. Sell-side analysts don’t expect much of a rebound, but they also don’t expect the company’s business to decline much further: their consensus earnings estimate for 2013 matches Occidental’s performing on a trailing basis very closely, and so the trailing and forward P/E multiples are both 10. The market has been pricing oil majors very cheaply in general- Exxon Mobil Corporation (NYSE:XOM) and BP plc (NYSE:BP), for example, are also in that same range- and we think that the industry is a good source of value though Occidental is not necessarily the cheapest stock. Occidental Petroleum Corporation also pays a dividend yield close to 3%.

David Shaw

46 hedge funds and other notable investors owned Occidental Petroleum Corporation at the end of the third quarter of the year, which earned it a place on our list of the most popular energy stocks among hedge funds (see the full rankings). Billionaire David Shaw’s D.E. Shaw was one of the funds reporting a position in the stock, increasing its stake slightly to 2.1 million shares (check out D.E. Shaw's stock picks). Renaissance Technologies, whose founder Jim Simons has become a billionaire thanks to the fund’s success since inception, also bought the stock and owned 1.2 million shares at the end of the quarter (find more stocks Renaissance Technologies has been buying).

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