GuruFocus tracks company insider trades which can provide a good indication of how management believes stock prices will perform. While an insider may sell for a number of reasons, former Fidelity Magellan fund manager Peter Lynch wrote in his book One Up On Wall Street that insiders buy for only one reason — they believe the stock will go up.
So far this month, four CEOs of S&P 500 companies have purchased shares in their companies; three of these are oil or energy firms in a struggling market environment.
Kinder Morgan (KMI, Financial)
On March 13, Chairman and CEO Richard Kinder bought 100,000 shares of the company for $39.50 per share. Prior to that, all insider trades recorded in 2013 and 2014 were buys, indicating the company has had confidence in the stock price for several years.
And indeed, the stock has risen 29% over the past year, and 32% over the past five years. It currently trades at $41.25 with a P/E ratio of 43.2 and P/S ratio of 2.88.
Kinder Morgan is a midstream and energy company that operates or owns an interest in 80,000 miles of pipelines and 180 terminals. Its pipelines transport natural gas, refined petroleum products, and crude oil.
EBIT per share for the trailing 12 months is $4.05, which has increased steadily since 2011.
In Q4 2014, Kinder Morgan reported net income of $126 million, down from $338 million in the year-ago quarter. The current dividend yield is 4.23%, while the payout ratio is a high 191%.
Marathon Oil Corp (MRO, Financial)
On March 10, President and CEO Lee Tillman purchased 28,791 shares of Marathon Oil at a price of $26.00 per share.
The stock price has declined 23% over the past year and currently trades at $26.41 with a P/E ratio of 6.2 and P/S ratio of 1.6.
Marathon Oil is an international energy company that produces products manufactured from natural gas and oil sands mining with operations in the U.S., Angola, Canada, Ethiopia, Kenya and the U.K.
When comparing the stock price with the Peter Lynch earnings line, Marathon Oil appears to be overvalued.
However, net income did increase from $375 million in Q4 2013 to $926 million in Q4 2014. The graph below shows the trend in annual net income.
Genuine Parts Co (GPC, Financial)
CEO Thomas Gallagher bought 4,000 shares of the company on March 6 when the stock traded at $93.44 per share.
Genuine Parts distributes automotive replacement parts, industrial replacement parts, office products and electrical/electronic materials. The stock price has increased 9% over the past year and now trades at $92.55, with a P/E ratio of 20.3 and P/S ratio of 0.93.
GuruFocus rates the business predictability as 3.5 out of 5 stars. The DCF model projects a fair value of $56.04, giving a -64% margin of safety.
EBIT per share has increased steadily over time, recording at $7.29 for the trailing 12 months.
Genuine Parts’ current dividend yield is 2.52%, while the payout ratio is 50%.
President and CEO David Crane bought 5,000 shares of NRG Energy on March 2 for $23.39 per share.
Over the past year, the stock declined 19%, and is currently priced at $25.00 with a P/E ratio of 121.6 and P/S ratio of 0.5.
NRG is a power and energy company whose main customers are in Texas and select Northeast markets. A cause for concern is that the operating margin has been in long-term decline. In FY 2014, the margin was 7.89%.
The current dividend yield is 2.3%, which is close to the three-year high, while the payout ratio is 235%. The high payout ratio indicates the dividend is likely unsustainable and may not have room for growth.
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