Famed money manager Peter Lynch gave us the inside scoop on how to look at insider transactions. Executives can sell their stock for any reason, he said, but they buy for only one: They think the price is going to go up!
Today, I've highlighted a handful of insiders who have made big purchases of their own company's stock in the past week. These aren't executives getting big chunks of shares from option grants. Rather, they're insiders putting their own money on the line, buying shares at market prices. I then paired that information with insights from the members of Motley Fool CAPS to see whether they think the stock has the same prospects the insiders do.
Market Value of Transactions
CAPS Rating(out of 5)
Continental Resources (NYS: CLR)
Harold Hamm, chairman and CEO
Hess (NYS: HES)
John Hess, chairman and CEO
Seacor (NYS: CKH)
Oivind Lorentzen, CEO
Sources: finviz.com, Motley Fool CAPS.
Although following the lead of insiders can be profitable, we still recommend you do further due diligence to determine whether these stocks ought to be sold from your own portfolio -- or would make a good addition! So this isn't a list of stocks to sell or buy, but just the inside track on companies you might want to check out further.
A uniform way of thinking
Maybe there's more than just coincidence in the fact that two Bakken oil shale plays, Continental Resources and Hess, are both seeing their CEOs buying large tranches of stock.
Continental, as the largest producer with 23 rigs, expects the Bakken to only grow in importance, estimating that the region has 24 billion barrels. With resistance to drilling growing in other parts of the country, the Bakken will be a linchpin in the country's onshore oil-production capabilities. It's why you'll find Kodiak Oil & Gas (NYS: KOG) , EOG Resources (NYS: EOG) , and many others targeting development there.
Earlier this year, the Bakken oil shale region experienced significant production delays because of severe winter weather and flooding, but work has been going overtime to compensate. Hess has 17 rigs dedicated to the Bakken but has had to lower annual production guidance because of the flooding.
As a result, Hess' shares have fallen 29% from their recent highs while Continental's stock is off 23%. The production reduction is seen as just a temporary situation, and management apparently sees the discounted stock as a good deal.
That could be why 97% of the CAPS members rating Hess believe it will outperform the broad market averages, while 96% see Continental doing so. As Keekers44 observes of Continental:
This company is heavily drilling in the Williston Basin and the Bakken. CLR estimates its own 2011 production growth in the range of 30% to 40%. CLR CEO Mr. Hamm noted on his interview with Jim Cramer on Mad Money North Dakota special that they have "hedged Continental for $90 oil," so even if the price of Oil goes down, CLR should be protected. All in all, a good top North Dakota play.
Let us know on the Continental Resources CAPS page whether you agree that the Bakken is going to be an even bigger deal in the future.
Although the drilling moratorium in the Gulf of Mexico has been lifted, drilling there hasn't returned to levels achieved before BP's (NYS: BP) spill, and the ramifications of the accident and subsequent government response continue to be felt.
Seacor, which provides support vessels for offshore oil and gas companies, has seen the situation improve, with utilization rates rising to 54% from 40% in the first quarter and day rates hitting almost $13,000 from less than $10,000. Now it's also planning on IPOing its helicopter transport services division, one of the largest helicopter operators in the world.
Like Bristow Group (NYS: BRS) , Seacor's Era Group division operates a fleet of helicopters that provide personnel transport in the oil and gas industry; search and rescue services; and utility, firefighting, and environmental services. Seacor's looking to raise $150 million from the offering.
With oil drilling returning to the Gulf and Seacor retaining a controlling interest in the spinoff, the oil services company is poised to prosper when conditions normalize. CAPS All-Stars apparently feel as hopeful as management does, as 91% of those weighing in think it will beat the Street.
Head over to the Seacor CAPS page and tell us whether it's possible to clean up by following other smart investors.
On the inside track
Following the insiders can be a path to profits, but it pays to start your own research on these stocks on Motley Fool CAPS. Read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made, all from a stock's CAPS page. Sign up today for the completely free service and tell us whether it's worth trading on this inside information.
At the time thisarticle was published Fool contributor Rich Duprey holds no position in any company mentioned. holdings and a short bio. The Motley Fool owns shares of Bristow Group. Try any of our Foolish newsletter services free for 30 days. We Fools don't 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.
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