Is This The Next Big Energy Firm You Should Invest In?
Brian is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
As the financial markets continue to be volatile, finding ways to outperform the market is much easier said than done. However, one screening tool that has proven to be effective in determining if a stock is going to move higher is insider buying, for one simple reason: they buy stocks, just like us, to make more money. In addition, insiders arguably have the best view of the company, being a part of the day-to-day operations, and probably have a large investment of their own which they would like to see increase in value. Below are a couple stocks with strong insider buying.
SandRidge Energy (NYSE: SD), based out of Oklahoma, is an independent oil and natural gas company with over $1.75 billion in annual revenue and a market capitalization of approximately $3 billion. The stock price has been choppy this past year, but recently has been trending lower and sitting not too far from its $4.81 52-week low. Well-respected value firm Fairfax Financial Holdings, headed by what many call the “Canadian Warren Buffett” Prem Watsa, seems to think there is value in the company, purchasing 4,975,000 shares from December 21-26 at an average price of $6.19, equating to a sizeable $30.8 million worth of the stock.
The company operationally has performed well, beating consensus analysts’ estimates the past four quarters, which is impressive when we consider how volatile crude oil and natural gas has been during that time. The company does not pay a dividend, which is discouraging, but trades at a relatively reasonable 1.1x price to book, and with such a respected firm accumulating a rather large number of shares, I think SandRidge is worth putting on one’s radar. If you're looking to be somewhat more conservative and yet still have exposure in this space, Chesapeake Energy (NYSE: CHK) is worth a look. The company has been raising plenty of cash lately by selling non-core assets, and trades at a cheap .9x price to book while paying a nice 2.1% dividend yield.
Health Management Associates (NYSE: HMA) operates general acute care hospitals and health care facilities throughout the United States. The company’s stock has been fantastic the past 52 weeks, as the stock sits right near its $9.32 52-week high. One would think that the company has become fully or even over-valued, but major shareholder Glenview Capital Management seems to think otherwise. The firm bought a massive 450,000 shares on Dec. 21 at $9.07, equating to over $4 million worth of stock. Looking deeper into the fundamentals, the last two quarters have been disappointing as the company has missed analyst estimates, but it seems to be more than priced into the stock price. Trading at a relatively cheap .35x price to sales and .85x enterprise value to sales, while sporting very nice returns on equity exceeding 21%, is nice to see. In addition, with the company generating over $200 million in free-cash-flow, expect the management team to continue investing that money wisely, and perhaps even institute a dividend or share buyback program.
I’d like to also say I appreciate you reading my thoughts and reiterate that these are just the views of the blogger and should not serve as a substitute for any professional financial advice or counsel in general. Respectful comments and questions are always welcome below on the comment board.
Wiseinvestors has no positions in the stocks mentioned above. The Motley Fool has the following options: long JAN 2013 $16.00 calls on Chesapeake Energy, long JAN 2014 $20.00 calls on Chesapeake Energy, long JAN 2014 $30.00 calls on Chesapeake Energy, and short JAN 2014 $15.00 puts on Chesapeake Energy. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!