Insider Weekends: Energy Insiders Continue Buying

A big decline in crude oil prices over the last two months where WTI crude dropped from just over $122 in early June to a little below $90 by the first week of August caused a decline in energy stocks. While the market was concerned about the impact of a recession on the demand side of the equation, energy investors saw another opportunity to fill up the tank and both company insiders as well as Warren Buffett decided to double down by buying more. I personally used the opportunity to add to my position in Diamondback Energy (FANG), an investment we discussed in our October 2021 newsletter as well as Continental Resources (CLR), which we discussed as our second spotlight idea last month.

Continental Resources now trades very close to Harold Hamm’s “go private” offer of $70 per share and is up nearly 300% since we initially added the company to the model portfolio in August 2020. Buffett picked up an additional $390 million of Occidental Petroleum (OXY) stock increasing Berkshire stake above 20% not counting preferred shares and warrants they hold. Last week we saw the Executive Chairman of Energy Transfer (ET) pick up $30 million worth of stock and the CEO of Civitas Resources (CIVI) pick up $2 million worth of stock. Civitas was created last year by merging the oil & gas production company Extraction Oil and Gas with Bonanza Creek Energy. Civitas is exclusively focused on Colorado’s Denver-Julesburg Basin and appointed a new CEO, Chris Doyle, three months ago.

We wrote the following about Energy Transfer in April after another insider purchase at the company,

Natural gas prices were range bound for the better part of the last decade, oscillating between $2 and $4 per million British thermal units (MMBtu) with the occasional spike outside that tight range. With a constant increase in supply and lackluster demand, beyond some unusually cold winters, many energy production companies started to shift production away from natural gas to focus on crude oil while others looked at more lucrative markets in the East to ship the excess natural gas. To ship natural gas to other international market, the gas has to be liquified first to create LNG and then shipped via special ocean tankers.

When you think about the big jump in natural gas prices in Europe and the upcoming disruption to supplies from Russia, Cheniere Energy (LNG) comes to mind. The company spent several years investing in building LNG terminals and in February 2016 started to export LNG. I had looked at Cheniere several times over the years but the company’s net losses, large capital investments and massive debt load in an environment that wasn’t favorable for natural gas prices did not give me much confidence. All of that changed with the current geopolitical  environment.

Another company that been building the infrastructure to export LNG and that struck a 20 year deal to supply LNG to China’s ENN last month is Energy Transfer LP (ET). As you can from the following chart from the company’s investor presentation, the company is starting to become a world leader in LNG exports.

Energy Transfer LNG Exports

Energy Transfer LNG Exports (source: Company Investor Presentation)

ET happens to be one of the few energy companies with significant insider ownership and it is always encouraging to see an independent director purchase shares on the open market like Mr. Michael Grimm did through his family partnership and for his children’s accounts. Mr. Grimm has served on the company’s board since October 2018 and has over 43 years of experience in the oil and natural gas industry.

While ET’s stock has done well this year, up nearly 40%, it has significantly underperformed its peers over the last five years and had negative returns during that period. Like Cheniere, the company has been investing heavily into its infrastructure and has managed to grow through a string of acquisitions. This left the company with a very large debt load (an astounding $50.23 billion in net debt) and low net income margins compared to peers. Just like Cheniere, this has changed in recent quarters and the company plans to scale back capital investments and increase EBITDA in 2022 as you can see below.

ET Capital Investments and EBITDA

ET Capital Investments and EBITDA (source: Company Investor Presentation)

Welcome to edition 632 of Insider Weekends. Insider buying increased significantly last week with insiders purchasing $212.22 million of stock compared to $51.51 million in the week prior. Selling also increased significantly to $9.06 billion compared to $831.35 million in the week prior.

Sell/Buy Ratio: The insider Sell/Buy ratio is calculated by dividing the total insider sales in a given week by total insider purchases that week. The adjusted ratio for last week went up to 42.71. In other words, insiders sold more than 42 times as much stock as they purchased. The Sell/Buy ratio this week was unfavorable compared to the prior week when the ratio stood at 16.14.

Notable Insider Buys:

1. Energy Transfer LP (ET): $11.67

Executive Chairman Kelcy L. Warren acquired 2,750,000 shares of this energy-related services provide, paying $10.94 per share for a total amount of $30.07 million. Mr. Warren increased his stake by 5.87% to 49,578,477 shares with this purchase.

You can view the list of recent insider transactions for Energy Transfer LP here.

P/E: 9.34 Forward P/E: 7.2 Industry P/E: 10.29
P/S: 0.44 Price/Book: 1.36 EV/EBITDA: 8.72
Market Cap: $36.02B Avg. Daily Volume: 20,585,877 52 Week Range: $7.96 – $12.48

2. Sonim Technologies, Inc. (SONM): $0.8899

Director Jeffrey Wang acquired 5,534,881 shares of this ruggedized mobile phones and accessories provider, paying $0.84 per share for a total amount of $4.65 million. These shares were purchased indirectly by AJP Holding Company. These shares were purchased indirectly by AJP Holding Company.

You can view the list of recent insider transactions for Sonim Technologies, Inc. here.

P/E: N/A Forward P/E: -0.34 Industry P/E: 25.30
P/S: 0.55 Price/Book: 1.56 EV/EBITDA: -0.14
Market Cap: $30.39M Avg. Daily Volume: 1,123,293 52 Week Range: $0.475 – $7.35

3. Quanterix Corporation (QTRX): $10.46

Shares of this life sciences company were acquired by 4 insiders:

  • Director Paul M. Meister acquired 234,304 shares, paying $8.53 per share for a total amount of $1.99 million. Mr. Meister increased his stake by 1279.86% to 252,611 shares with this purchase.
  • Director David R. Walt acquired 150,000 shares, paying $8.62 per share for a total amount of $1.29 million. Mr. Walt increased his stake by 11.71% to 1,431,312 shares with this purchase.
  • Director Martin D. Madaus acquired 89,667 shares, paying $8.43 per share for a total amount of $755,543. These shares were purchased indirectly by a trust.
  • Director Sarah E. Hlavinka acquired 10,160 shares, paying $9.89 per share for a total amount of $100,440. Mr. Hlavinka increased his stake by 63.07% to 26,270 shares with this purchase.

You can view the list of recent insider transactions for Quanterix Corporation here.

P/E: N/A Forward P/E: -6.12 Industry P/E: 27.27
P/S: 3.48 Price/Book: 0.95 EV/EBITDA: -0.83
Market Cap: $386.89M Avg. Daily Volume: 688,020 52 Week Range: $6.31 – $60.92

4. Health Catalyst, Inc. (HCAT): $13.28

Chief Executive Officer Daniel D. Burton acquired 176,522 shares of this data and analytics technology and services provider to healthcare organizations, paying $11.62 per share for a total amount of $2.05 million. Mr. Burton increased his stake by 39.83% to 619,674 shares with this purchase.

You can view the list of recent insider transactions for Health Catalyst, Inc. here.

P/E: N/A Forward P/E: -60.36 Industry P/E: 27.27
P/S: 2.74 Price/Book: 1.53 EV/EBITDA: -5.79
Market Cap: $726.73M Avg. Daily Volume: 1,133,343 52 Week Range: $10.95 – $57.19

5. Civitas Resources, Inc. (CIVI): $64.96

President & CEO M. Christopher Doyle acquired 33,623 shares of this oil and natural gas exploration and production company, paying $59.66 per share for a total amount of $2 million. Mr. Doyle increased his stake by 59.64% to 89,999 shares with this purchase.

You can view the list of recent insider transactions for Civitas Resources, Inc. here.

P/E: 5.29 Forward P/E: 4.99 Industry P/E: 10.29
P/S: 2.07 Price/Book: 1.11 EV/EBITDA: 3.14
Market Cap: $5.52B Avg. Daily Volume: 845,987 52 Week Range: $31.74 – $84.76

You can view the full list of purchases from this Insider Buying page.

Notable Insider Sales:

1. Tesla, Inc. (TSLA): $900.09

CEO Elon Musk sold 7,924,107 shares of Tesla for $869.09, generating $6.89 billion from the sale. These shares were sold indirectly by a trust.

You can view the list of recent insider transactions for Tesla, Inc. here.

P/E: 103.46 Forward P/E: 56.5 Industry P/E: 14.00
P/S: 14 Price/Book: 25.76 EV/EBITDA: 66.23
Market Cap: $940.14B Avg. Daily Volume: 30,755,119 52 Week Range: $620.57 – $1243.49

2. XPO Logistics, Inc. (XPO): $60.12

Chief Executive Officer Jacobs S. Bradley sold 5,061,029 shares of this supply chain management solutions provider for $55.17, generating $279.22 million from the sale. These shares were sold indirectly by Jacobs Private Equity, LLC.

You can view the list of recent insider transactions for XPO Logistics, Inc. here.

P/E: 8.88 Forward P/E: 10.49 Industry P/E: 19.87
P/S: 0.52 Price/Book: 4.05 EV/EBITDA: 7.33
Market Cap: $6.92B Avg. Daily Volume: 1,398,969 52 Week Range: $45.09 – $90.78

3. GXO Logistics, Inc. (GXO): $49.76

Director Jacobs S. Bradley sold 5,167,500 shares of this supply chain management solutions provider for $48.35, generating $249.85 million from the sale.These shares were sold indirectly by Jacobs Private Equity, LLC.

You can view the list of recent insider transactions for GXO Logistics, Inc. here.

P/E: 25.13 Forward P/E: 15.95 Industry P/E: 19.87
P/S: 0.7 Price/Book: 2.33 EV/EBITDA: 15.78
Market Cap: $5.9B Avg. Daily Volume: 1,163,290 52 Week Range: $38.075 – $105.92

4. Rollins, Inc. (ROL): $36.97

Chairman and CEO Gary W. Rollins sold 2,172,317 shares of this pest and wildlife control services for $37.45, generating $81.35 million from the sale. These shares were sold indirectly through LOR, Inc.

You can view the list of recent insider transactions for Rollins, Inc. here.

P/E: 55.18 Forward P/E: 45.64 Industry P/E: 19.87
P/S: 7.12 Price/Book: 15.89 EV/EBITDA: 33.96
Market Cap: $18.2B Avg. Daily Volume: 1,573,274 52 Week Range: $28.51 – $40.11

5. SBA Communications Corporation (SBAC): $350.04

Shares of this first choice provider and leading owner and operator of wireless communications infrastructure in North, Central, and South America and South Africa were sold by 2 insiders:

  • Chief Executive Officer & President Jeffrey Stoops sold 88,564 shares for $345.44, generating $30.59 million from the sale.
  • EVP – Site Leasing Jason V. Silberstein sold 16,464 shares for $350.38, generating $5.77 million from the sale. These shares were sold as a result of exercising options immediately prior to the sale.

You can view the list of recent insider transactions for SBA Communications Corporation here.

P/E: 106.4 Forward P/E: 71.15 Industry P/E: 34.50
P/S: 15.37 Price/Book: N/A EV/EBITDA: 32.99
Market Cap: $37.76B Avg. Daily Volume: 632,238 52 Week Range: $286.41 – $391.15

You can view the full list of sales from this Insider Sales page.

The list of all insider purchases and sales by management people is only available to InsideArbitrage Premium and Plus members.

Disclaimer: I hold long positions in Diamondback Energy (FANG) and Continental Resources (CLR). Please do your own due diligence before buying or selling any securities mentioned in this article. We do not warrant the completeness or accuracy of the content or data provided in this article.

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