Keeping track of insider purchases is key to our investment strategy. Performing this task, I came across two interesting cases of oil and gas companies that saw their insiders acquire their stock recently. Let’s take a look at them:
First off is CONSOL Energy Inc. (NYSE:CNX), a $9.94 billion market cap oil and gas exploration and production (E&P) and coal mining company that boasts industry leading returns on equity (14.7%, versus an industry average of 7.1%), net margins and returns on assets. However, its stock trades at 122 times the company’s earnings, more than 4 times its peers’ mean.
Despite the sky-high valuation and considerable debt level that the company has, two Board Directors acquired the stock over the past few days. On May 7, Alvin Carpenter procured 2,000 Common shares, $0.01 par value per share, for $43.59 per share. He now owns 36,589 shares of the company, worth $1.58 million. Another Director, Maureen Lally-Green, bought 800 shares on May 6, and an extra 200 shares on May 7. She paid $43.90 per share and $43.75 per share, respectively, and now holds 4,589 shares of the E&P company.
Moreover, in their last 13F filing, Mason Hawkins’ Southeastern Asset Management and Bill Miller’s Legg Mason Capital Management (the two largest hedge fund shareholders) declared having increased their stakes in the company. The first fund upped its stakes by 2%, to 22.69 million shares, and the latter, by 16%, to 2.397 million shares.
The second case I would like to look into is that of Hornbeck Offshore Services, Inc. (NYSE:HOS), a $1.44 billion market cap provider of marine services such as exploration and production, oilfield service, offshore construction and military customers. Although returns are not as attractive in this case, and debt levels are concerning, margins are amongst the best in the oil and gas equipment and services industry. In addition, the stock trades at an attractive valuation, at 22.3 times the company’s earnings (slightly below its industry’s mean).
On May 7, two insiders acquired Hornbeck’s stock. Todd Hornbeck, President and CEO, purchased 50,000 shares of Common Stock for prices ranging from $38.42 per share to $38.65 per share. The shares were allocated at different direct and indirect holdings of Mr. Hornbeck’s, who now owns 803,554 shares directly, and 51,940, indirectly. On that same date, Larry Hornbeck, Board Director, also bought 5,500 shares of the company for $38.25 each. He currently holds 198,219 shares directly, and 85,000 shares through various Family Trusts.
On top of the insider bullishness, hedge funds are also placing big bets on the company. Debra Fine’s Fine Capital Partners last declared having increased its stakes by 40%, to 2.068 million shares, and William B. Gray’s Orbis Investment Management, by 18%, to 1.65 million shares.
Disclosure: Javier Hasse holds no position in any stocks mentioned