Last Friday, May 9th, the Energy sector witnessed high insider activity. Amongst the stocks that insiders bought, a couple caught my eye in account of their below-average valuations coupled with generous dividend yields. Let’s take a look at these companies in order to elucidate if they could stand as attractive investment options (and, thus, deserve further research):
First off is Kinder Morgan Inc (NYSE:KMI), a $33.3 billion market cap energy transportation and storage company, which saw its Chairman and CEO (and more than 10% owner), Richard D. Kinder, acquire 100,000 shares of Class P Common Stock. These shares were purchased in multiple transactions, at prices ranging from $32.26 per share to $32.47 per share, inclusive. Mr. Kinder now owns more than 231 million shares, worth about $7.5 billion.
Kinder Morgan’s stock trades at 27.9 times the company’s earnings, compared to an Oil & Gas Midstream industry P/E average of about 39.20, and yields about 5.23% of the current stock price in the form of dividends. In addition, more than 40 hedge funds hold long positions in the stock. The largest hedge fund shareholder, Stephen Mandel’s Lone Pine Capital, last declared owning more than 69.9 million shares of the company. Other prominent investors betting on this company are Barry Rosenstein (Jana Partners), who last declared having stared a position in the stock with 15.5 million shares, and Daniel S. Och (Oz Management), who increased his stakes by 8%, to 12.7 million shares, over the last reported quarter.
The second company in this list is substantially smaller: its market cap only reaches $145 million. Bolt Technology Corp. (NASDAQ:BOLT) develops, manufactures and sells marine seismic data acquisition equipment and underwater remotely operated robotic vehicles. Last Friday, Raymond M. Soto, CEO and Chairman, acquired 5,000 shares of Common Stock for $16.22 per share. He currently holds 208,747 shares directly.
Just like in the previous case, Bolt’s stock also trades at a significant discount in relation to its peers’ average valuation -at a P/E of 14.50 versus an Oil & Gas Equipment & Services industry average of around 24.30 P/E. The dividend yield of 2.20% is also quite generous, so one can understand Mr. Soto’s bet. And he seems to be not the only one bullish about this stock. Jim Simons’ Renaissance Technologies last upped its stakes by 2%, to 194,800 shares, and John W. Rogers’ Ariel Investments, by 22%, to 554,021.
Disclosure: Javier Hasse holds no position in any stocks mentioned