Corporate Execs Are Bulking Up On Duke Energy Corp (DUK), Apache Corporation (APA) & More

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It’s sometimes said that company insiders have many reasons to sell a stock, but only one reason to buy: they are confident enough in the business’s prospects to overcome the standard aversion to buying shares and therefore increasing their company-specific risk. Empirically, there is in fact a small outperformance effect for stocks bought by insiders (read our analysis of studies on insider trading). As a result we like to check in on recent insider purchases and see if there are any names which may be worth closer research from retail investors. Read on for our thoughts on five stocks insiders have bought recently.

A member of the Board of Directors at Apache Corporation (NYSE:APA) bought 10,000 shares of the oil and gas company in early September. Apache Corporation (NYSE:APA) trades at 13 times its trailing earnings, as markets are generally pricing large energy companies at low earnings multiples on the theory that profits tied to oil prices have more downside risk than upside potential. Apache Corporation (NYSE:APA) also gets about a quarter of its oil production from Egypt. In terms of energy equivalent, oil is responsible for a little less than half of production volumes.

In addition to insider trading activity, we also follow quarterly 13F filings from hundreds of hedge funds and other investors. Our research has shown that the most popular small cap stocks among hedge funds generate an average excess return of 18 percentage points per year (learn more about our small cap strategy), providing us with one use for this information; in fact, our portfolio based on these results outperformed the S&P 500 by 33 percentage points since inception last summer. Of course we can also use this database to track interest in individual stocks over time, and can in fact see that Apache Corporation (NYSE:APA) was billionaire T. Boone Pickens’s top stock pick last quarter (see more stock picks from T. Boone Pickens).

Raj Rajaratnam thinking

Duke Energy Corp (NYSE:DUK), one of the largest publicly traded U.S. electric utilities with a market capitalization of $46 billion, has also been seeing insider buying recently. At current prices and dividend levels, Duke Energy Corp (NYSE:DUK)’s annual yield is 4.3% and as a large-cap utility it features little exposure to the overall economy with a beta barely above 0. Income or dividend investors may therefore be interested in comparing the stock to its peers. Millennium Management, managed by billionaire Israel Englander, increased its stake in Duke Energy Corp (NYSE:DUK) to nearly 2 million shares between April and June of this year (check out more stocks Millennium has been buying).
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