There’s little doubt that the energy sector has garnered the most attention in the market recently due to plunging oil prices. The situation is great for consumers but weary for oil companies. The Energy Select Sector SPDR (XLE, Financial) has been down 11.96% since the beginning of the quarter.
With the market down, this is precisely the time for value investors to think about buying into the market. One indicator that can be helpful in determining where markets are headed is aggregated insider trades. GuruFocus lists all company insider buys and sells, which can be found under the Insider tab on each stock page. The site also provides insider buy and sell statistics for markets as a whole; these can be viewed by hovering over the “Insider” tab on the top menu, and clicking “Insider Trends.”
This feature shows the ratio of insider buys to sells in relation to the entire market, but also breaks down by sector. The following graph depicts the market as a whole.
From October to now, insider buying in the energy sector increased sharply, with the ratio jumping from 1.58 from July to October, to 4.62 in the current period.
Insiders at two energy companies recently purchased a significant amount of shares of their stock. These are Miller Energy Resources (MILL, Financial) and Eco-Stim Energy Solutions (ESES, Financial).
Director Bob Gower bought 40,000 shares of Miller Energy on Jan. 6 at a price of $1.08 per share, and 60,000 shares on Dec. 22 for $1.26 per share. CEO Carl Fredrick Giesler purchased 40,000 shares on Dec. 12 for $1.40 per share.
Miller Energy Resources is an exploration and production company of oil and natural gas in the Cook Inlet Basin of Alaska and the Appalachian region of Tennessee. Miller operates 380 wells and has more than 46,000 acres of lease holdings in the region.
The company’s stock has been down 84% over the past year. According to a company press release from Dec. 1, about 90% of Miller’s current oil production is hedged due to the oil price levels. Miller is also pursuing a lower-risk gas-focused drilling plan. Based on these points, the company believes “it has sufficient liquidity if oil prices remain at current levels for the foreseeable future.”
Total current assets jumped from $30.56 million in FY 2013 to $71.24 million in FY 2014; however, total current liabilities also increased dramatically to $74.91 million. To maintain a suitable balance sheet, Miller must focus on improving its current ratio.
Insiders at Resolute Energy Corp have also scooped up a large number of shares recently, buying 140,000 shares since Jan. 7.
The largest purchase was on Jan. 7, when CEO Nicholas Sutton purchased 100,000 shares for $0.90 per share.
Resolute Energy produces and develops domestic oil and gas; its primary assets are properties in the Paradox Basin in Utah, as well as a gas field in the Powder River Basin of Wyoming.
Over the past year, the stock has declined 90% and currently trades at $0.84. After a difficult FY 2013, some of Resolute’s numbers improved in the most recent quarter, with operating margin pulling out of the negatives to 3.23%.
Resolute’s revenue growth rate is 44.6% over the past five years, while its free cash flow growth rate is 150.8% over the same time period.
As of the third quarter, Chuck Royce (Trades, Portfolio) owns 375,234 shares of the company, or 0.48% of shares outstanding.
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