In this article, we will be discussing the insider buying activity at three companies. But first, let’s make you familiar with why Insider Monkey tracks insider trading activity. To begin with, we consider insider buying to be more informative than insider selling simply because “Insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise”. This is a great quote of Peter Lynch and makes a lot of sense. Extensive research has found that insiders tend to greatly outperform the broader market, despite the fact that their trades have been less predictive over time. Even so, we reckon that tracking insider trading activity should be a critical part of each investor’s stock picking approach. Going back to the three companies mentioned above, this article will investigate the insider buying activity at Dorian LPG Ltd (NYSE:LPG), Civeo Corporation (Canada) (NYSE:CVEO), and Kayne Anderson Midstream Energy Fd Inc. (NYSE:KMF).
Most investors can’t outperform the stock market by individually picking stocks because stock returns aren’t evenly distributed. A randomly picked stock has only a 35% to 45% chance (depending on the investment horizon) to outperform the market. There are a few exceptions, one of which is when it comes to purchases made by corporate insiders. Academic research has shown that certain insider purchases historically outperformed the market by an average of seven percentage points per year. This effect is more pronounced in small-cap stocks. Another exception is the small-cap stock picks of hedge funds. Our research has shown that the 15 most popular small-cap stocks among hedge funds outperformed the market by nearly a percentage point per month between 1999 and 2012. We have been forward testing the performance of these stock picks since the end of August 2012 and they have returned more than 118% over the ensuing 36 months, outperforming the S&P 500 Index by nearly 61 percentage points (read the details here). The trick is focusing only on the best small-cap stock picks of funds, not their large-cap stock picks which are extensively covered by analysts and followed by almost everybody.
Let’s start out by studying the insider trading activity at Dorian LPG Ltd (NYSE:LPG), a liquefied petroleum gas (LPG) shipping company. Director Ted Kalborg reported the acquisition of a 20,000 share-stake at a price of $10.20 per share, which was purchased by Christmas Common Investments Ltd. which has Kalborg Trust as the sole shareholder. At the same time, Chief Financial Officer Theodore B. Young acquired 1,000 shares at a weighted average price of $10.57 last week, enlarging his stake to 105,082 shares. According to the earnings report released by Dorian LPG two months ago, Asia accounted for roughly 30% of the U.S exports of LPG. Similarly, there was strong fundamental demand for LPG at the time, but that quickly changed with the growing concerns about China’s economic slowdown. Thus, the shares of Dorian LPG have embarked on a steep downtrend since mid-July after returning 20% in the first half of the year. The stock has lost hold of all the gains realized during that period and has now lost more than 21% since the beginning of the year, which might point to the fact that these insiders are buying shares with the belief that they are cheap. Michael Lowenstein’s Kensico Capital is the top shareholder of Dorian LPG Ltd (NYSE:LPG) within our database, owning 8.01 million shares as of June 30.
We will now take a look at the insider buys at Civeo Corporation (Canada) (NYSE:CVEO), a low-priced stock acquired by two insiders in September. Bradley J. Dodson, who serves as President and Chief Executive Officer, purchased 70,000 shares at prices in the range of $1.49-to-$1.56 last week. Following the recent transactions, the executive holds a position comprised of 777,476 shares. It is also worth pointing out that he acquired an additional 256,000 shares during September. At the same time, Frank C. Steininger, who has been acting as Chief Financial Officer, Senior Vice President and Treasurer since May 2014, bought 40,000 shares at a weighted average price of $1.89, boosting his stake to 169,274 shares. Even though Civeo Corporation is not an actual energy company, its operations and activities are fully linked to the struggling energy industry. The company, which provides remote site accommodations to the natural resource industry, has seen its shares drop more than 58% since the start of 2015, so there are no doubts that these insiders have been acquiring shares on weakness. Israel Englander’s Millennium Management is bullish on Civeo Corporation (Canada) (NYSE:CVEO), holding a 4.59 million share-stake.
Lastly, we will examine the insider trading activity at close-ended mutual fund Kayne Anderson Midstream Energy Fd Inc. (NYSE:KMF). Chief Financial Officer and Treasurer Terry A. Hart added 8,000 shares, acquired for $19.64 each, to a holding that now consists of 11,378 shares. Similarly, Vice President Jody Meraz purchased 3,000 shares at $19.40 apiece and currently holds 5,128 shares. The closed-end mutual fund primarily invests in energy master limited partnerships (MLPs), which doubtlessly serves as an explanation for its disappointing stock performance in 2015. The stock has lost over 40% year-to-date, but appears to be bouncing back at the moment. The mutual fund’s net assets added up to $420 million on September 30, which yielded a net asset value per share lower than its actual share price on the market. However, the aforementioned insiders might be betting on a turnaround in the energy sector, which will surely improve their returns for shareholders.