×

Subscribe Today

Get our free articles delivered directly to your email!

Continue reading

Energy Sector Insider Buying Ramps Up – Insider Weekends

  • July 16, 2023

As mentioned in our last Insider Weekends post, we are currently in a “quiet period” before earnings announcements and hence insider activity (especially on the buy side) has slowed down sharply. When looking at the top insider transactions this week, we found that many of the companies listed were either companies we had written about many times in the past (such as Asana, where Founder and CEO Dustin Moskovitz continues to purchase shares via an established 10b5-1 trading plan) or micro-cap companies with incredibly tiny purchases.

For this article, instead of focusing on a specific company, we decided to do a 30,000 foot view and look at the last 90 days of insider purchases. We did this using our Sector Heat Map, which displays a heat map of management insider purchases across all sectors. The heat map only takes management insider purchases into account, excluding any 10% owners or directors who may purchase shares of a company. When filtering this heat map by both the number of companies with insiders that are purchasing shares and the number of total purchases, we found that a few sectors stood out.

Heat Map of Insider Purchases Across All Sectors, Filtered By The Number of Purchases Over The Last 90 Days
Heat Map of Insider Purchases Across All Sectors, Filtered By The Number of Purchases Over The Last 90 Days

The software sector (as is typical) had a large number of management insiders purchase shares (worth $35 million in total). Examples include the two featured companies in our last two Insider Weekends articles, Concentrix (CNXC) and Asana (ASAN). The banking sector was another standout, following the banking frenzy earlier this year and the rather infamous collapse of Silicon Valley Bank. The sector that really stood out with over $40 million in management insider purchases was energy.

The energy sector has featured our Insider Weekends articles many times in the past, but also is incredibly present across all our different strategies. We wrote the following in our April 2023 Mid Month Update about different frackers in our portfolio:

We picked a fracking company, Continental Resources, as a spotlight idea for our August 2020 Special Situations Newsletter following insider purchases by its founder Harold Hamm. The position turned out the most profitable one in the model portfolio when we exited for a gain of nearly 330% when Harold Hamm took the company private in November 2022. The other fracker in our portfolio is Diamondback Energy (FANG), which we discussed in our October 2021 newsletter following a large $2 billion buyback announcement by the company and it is currently up 55% in the model portfolio.

We wrote the following about Diamondback Energy and frackers in general in that October 2021 newsletter:

What was remarkable about this buyback announcement was that it was coming from a fracking company. When I think of fracking companies, the first thing that comes to mind is the hilarious “meet the frackers” presentation by Einhorn at the Sohn Conference in 2015. I have a great deal of respect for Greenlight Capital’s David Einhorn and I enjoyed reading his book Fooling Some of the People All of the Time, A Long Short Story about his multi-year battle shorting Allied Capital. For a period of time, Einhorn was right about the frackers as they continued to consume ever increasing amounts of capital to drill holes, flood the energy market with excess supply and got hurt by an OPEC engineered price war.

However, this has changed in recent years with companies like Continental Resources and Diamondback Energy reigning in costs and being selective about CapEx. The huge rebound in the price of WTI has helped and instead of drilling more and increasing CapEx, companies like Diamondback are now focused on returning value to shareholders through buybacks and increasing dividends.

While crude oil prices have dropped a lot since June 2022 and the frackers have also seen their stocks pull back from the peak, they continue to generate record profits at oil prices over $80 and have been consistently returning capital to shareholders through regular dividends, special dividends and buybacks.

Frackers are just one part of the energy sector, and we’ve seen companies in the renewable energy sector also thrive. Both the large-cap company Enphase Energy (ENPH) and the micro-cap FTC Solar (FTCI) have risen by around 10% and 35% respectively since we discussed insider purchases in solar energy companies:

Beyond regional banks, the other insider purchase that stood out last week was the $10 million purchase of Enphase Energy (ENPH) by its Director Thurman J. Rodgers. This purchase was reminiscent of the purchase of the microcap company FTC Solar (FTCI) by its independent Director T. J. Rodgers we discussed in an Insider Weekends article three weeks ago. In that article we highlighted some of the tailwinds benefiting solar energy companies and wrote the following:

Demand for residential solar installation is up significantly in recent years due to federal incentives as well as state mandated standards such as California’s requirement that every new single family home and certain multifamily properties have to install a solar electric system starting in January 2020. However the biggest gains both in terms of efficiency and costs have been on the utility scale solar projects. Thin-film solar cells have seen their efficiency increase from just 8% in 1980 to over 23% this year.

This has helped utility scale solar projects achieve cost parity with fossil fuels and in some cases they are cheaper than fossil fuel powered projects.

Not only are management insiders in the energy sector buying shares, but directors and 10% owners have also joined in on the share purchases. Starting from March 2022, Warren Buffett (via Berkshire Hathaway) has consistently bought shares of the oil & gas company Occidental Petroleum (OXY), which has risen by over 22% over that time period. Mr. Buffet made his last purchase of Occidental on June 28th, in a transaction worth over $120 million.

Extending beyond insiders, we’ve seen many companies in the energy sector buying back their own stock. Just last week, the Canadian oil and gas exploration and production company Vermilion Energy (VET) received approval to repurchase up to 16.31 million common shares over the course of a year. We wrote the following in our BuyBack Wednesdays post on the subject:

On July 10, 2023, Vermilion announced that it had received Toronto Stock Exchange (TSX) approval to commence a Normal Course Issuer Bid (NCIB) to purchase up to 16.31 million common shares, equivalent to around 10% of its outstanding shares as of June 28, 2023, over the course of twelve months. Vermilion shares are down 11.4% YTD. This decline can be attributed to the decline in energy prices, European natural gas prices specifically, which have played a significant role in the company’s recent financial performance.

Similarly, oil drilling equipment manufacturer, Cactus Inc. (WHD), also announced a share repurchase program in early June, following their acquisition of FlexSteel, another equipment manufacturer specializing in spoolable pipe technologies. The buyback program was worth $150 million, which was equivalent to roughly 6% of the company’s market cap on announcement. Following the buyback announcement, the stock rose by over 7%.

While we tend to avoid using a sole insider purchase in a company as a significant signal, we do like to dive a bit deeper into sector-wide purchases by multiple insiders across various companies. With numerous insiders purchasing shares of energy companies, in addition to the energy companies themselves repurchasing shares, it appears like management teams are optimistic about how our energy future plays out.

Welcome to edition 690 of Insider Weekends. Insider buying increased slightly last week with insiders purchasing $11.14 million of stock compared to $10.34 million in the week prior. Selling declined to $520.84 million compared to $600.5 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 the total insider purchases that week. The adjusted ratio for last week dropped to 46.76. In other words, insiders sold almost 47 times as much stock as they purchased. This week, the Sell/Buy ratio was favorable, compared to the prior week when the ratio stood at 58.1.

Notable Insider Buys:

1. Asana, Inc. (ASAN): $23.02

President, CEO, & Chair Dustin A. Moskovitz acquired 320,000 shares of this work management platform, paying $21.53 per share for a total amount of $6.89 million. Mr. Moskovitz increased his stake by 0.80% to 40,232,803 shares with this purchase.

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

P/E: N/AForward P/E: -71.94Industry P/E: 25.59
P/S: 8.62Price/Book: 14.33EV/EBITDA: -13.51
Market Cap: $4.99BAvg. Daily Volume: 2,406,70952 Week Range: $11.32 – $29.51

2. Calavo Growers, Inc. (CVGW): $30.93

Chief Executive Officer Lecil E. Cole acquired 75,000 shares of this avocado retailer, paying $30.34 per share for a total amount of $2.28 million. Mr. Cole increased his stake by 17.05% to 515,000 shares with this purchase.

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

P/E: N/AForward P/E: 19.09Industry P/E: 23.17
P/S: 0.52Price/Book: 2.6EV/EBITDA: 30.95
Market Cap: $550.07MAvg. Daily Volume: 131,87952 Week Range: $22.64 – $45.5

3. Landmark Bancorp, Inc. (LARK): $21.6

Shares of this regional bank were acquired by 2 insiders:

  • Director Jim Lewis acquired 2,723 shares, paying $21.54 per share for a total amount of $58,662. Mr. Lewis increased his stake by 2.09% to 133,290 shares with this purchase.
  • Director Richard Ball acquired 1,566 shares, paying $21.55 per share for a total amount of $33,747. Mr. Ball increased his stake by 0.89% to 178,076 shares with this purchase.

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

P/E: 11.19Forward P/E: N/AIndustry P/E: 9.33
P/S: 2.08Price/Book: 0.96EV/EBITDA: N/A
Market Cap: $112.66MAvg. Daily Volume: 3,38352 Week Range: $19.15 – $27.2

4. ZeroFox Holdings, Inc. (ZFOX): $1.05

Director Barbara Lynn Stewart acquired 51,000 shares of this software-as-a-service-based external cybersecurity solutions provider, paying $0.98 per share for a total amount of $50,000.

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

P/E: N/AForward P/E: -4.77Industry P/E: 25.59
P/S: 0.83Price/Book: 0.26EV/EBITDA: -8.57
Market Cap: $124.6MAvg. Daily Volume: 720,66752 Week Range: $0.748 – $15.73

5. Culp, Inc. (CULP): $5.15

Shares of this textile manufacturing company were acquired by 2 insiders:

  • Director Kimberly Bullock Gatling acquired 2,666 shares, paying $5.15 per share for a total amount of $13,718. Mr. Gatling increased his stake by 14.28% to 21,332 shares with this purchase.
  • Director John Allen Baugh acquired 2,542 shares, paying $5.10 per share for a total amount of $12,959. Mr. Baugh increased his stake by 10.09% to 27,739 shares with this purchase.

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

P/E: N/AForward P/E: 14.31Industry P/E: 17.24
P/S: 0.27Price/Book: 0.71EV/EBITDA: -2.44
Market Cap: $63.48MAvg. Daily Volume: 20,04552 Week Range: $3.95 – $5.7

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

Notable Insider Sales:

1. Copart, Inc. (CPRT): $93.64

co-Chief Executive Officer Jayson A. Adair sold 300,000 shares of this online auctions and vehicle remarketing services provider for $88.32, generating $26.49 million from the sale. These shares were sold indirectly by a trust.

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

P/E: 39.18Forward P/E: 34.05Industry P/E: 20.08
P/S: 11.91Price/Book: 7.99EV/EBITDA: 26.4
Market Cap: $44.71BAvg. Daily Volume: 2,241,91252 Week Range: $52.285 – $93.68

2. Alphabet Inc. (GOOG): $125.7

Shares of Alphabet were sold by 2 insiders:

  • Director Kavitark Ram Shriram sold 150,000 shares for $118.42, generating $17.76 million from the sale. 10,820 of these shares were sold indirectly by Mr. Shriram’s spouse, and 107,940 of these shares were sold indirectly by a trust.
  • Director John L. Hennessy sold 200 shares for $125.00, generating $25,000 from the sale.

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

P/E: 26.8Forward P/E: 20.21Industry P/E: 19.71
P/S: 5.6Price/Book: 6.13EV/EBITDA: 17.14
Market Cap: $1.59TAvg. Daily Volume: 25,771,83252 Week Range: $83.45 – $129.55

3. Atlassian Corporation (TEAM): $178.97

Shares of this software application company were sold by 2 insiders:

  • Co-CEO, Co-Founder Michael Cannon-Brookes sold 41,205 shares for $173.68, generating $7.16 million from the sale. These shares were sold indirectly by a trust.
  • Director Enrique T. Salem sold 10,000 shares for $168.13, generating $1.68 million from the sale.

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

P/E: N/AForward P/E: 82.86Industry P/E: 25.59
P/S: 13.71Price/Book: 79.09EV/EBITDA: -94.88
Market Cap: $46BAvg. Daily Volume: 2,014,35952 Week Range: $113.855 – $300.29

4. Shutterstock, Inc. (SSTK): $55.2

Executive Chairman Jonathan Oringer sold 130,465 shares of this  image services company for $53.26, generating $6.95 million from the sale.

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

P/E: 24.32Forward P/E: 12.38Industry P/E: 19.71
P/S: 2.36Price/Book: 4.16EV/EBITDA: 11.8
Market Cap: $1.99BAvg. Daily Volume: 787,85352 Week Range: $44.61 – $81.23

5. Toast, Inc. (TOST): $25.08

Shares of this cloud-based digital technology platform for the restaurant industry were sold by 2 insiders:

  • Co-President Stephen Fredette sold 160,000 shares for $26.06, generating $4.17 million from the sale.
  • COO & Co-President Aman Narang sold 105,000 shares for $26.05, generating $2.74 million from the sale.

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

P/E: N/AForward P/E: -59.71Industry P/E: 9.33
P/S: 4.41Price/Book: 12.07EV/EBITDA: -34.38
Market Cap: $13.3BAvg. Daily Volume: 6,685,86252 Week Range: $13.655 – $26.665

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 a long position in Netflix. 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.