An Insider Bought Shares of Xcel Energy

Timothy Wolf, who serves on the Board of Directors at Xcel Energy Inc (NYSE:XEL), bought 4,000 shares of the company’s stock on February 1^st at an average price of $27.98 per share, according to a filing with the SEC. Xcel is an electric and natural gas utility operating in the United States. We keep track of insider trading activity because studies show that insider purchases are bullish signals, albeit somewhat weak ones (see our analysis of studies on insider trading). We think that stocks bought by insiders outperform because these people face incentives to diversify their wealth away from the company, and so buying shares suggests that there are confident enough to ignore the benefits of that diversification.

In addition to insider trading activity we also track filings from hedge funds and other notable investors. For example, in our August newsletter we were able to list the most popular small cap stocks among hedge funds, the idea being that these stocks are more likely to be mispriced and so fund research teams are particularly likely to find cheap picks; our portfolio went on to achieve an excess return of 18 percentage points between September and January (read more about our hedge fund strategies). Looking at recent 13F filings which included Xcel Energy Inc specifically, billionaire Israel Englander’s Millennium Management reported a position of about 800,000 shares at the end of September (check out Englander’s stock picks). Navellier & Associates, managed by Louis Navellier, owned 1.4 million shares and this was a slight increase from three months earlier (find Navellier’s favorite stocks).

Xcel Energy Inc recently reported its results for the fourth quarter of 2012 and consequently for the year as a whole. In Q4, revenue and earnings were about flat versus a year earlier as might be expected for an electric utility. Margins on the electric business were higher earlier in the year, as revenues decreased to a lesser degree than costs, and so 2012 was characterized by somewhat higher net income than 2011. However given last quarter’s results we’d conclude that gap has dissipated.