The One Commodity With Heavy Insider Buying…
by Graham Summers
July 14, 2006
On Wednesday, I mentioned St. Jude Medical (STJ) as a stock with heavy insider buying.
And St. Jude isn’t alone. In the past six months, the medical industry represented a big chunk of the stock market’s insider buying.
Today, I’ll tell you another business the insiders are bullish on: natural gas.
After exploding in the late summer/early fall of 2005 following Hurricanes Katrina and Rita, natural gas prices soon fell due to a mild winter and a glut in natural gas supplies. Unlike oil, natural gas is primarily a domestic commodity, with Canada representing America’s chief importer. Canada isn’t exactly a political strife area.
And with natural gas trading above $10 per million BTU, energy producers began shifting to other fuel sources, resulting in a surplus of natural gas. Supplies rose, demand fell, and soon the price was down to $5 and change.
That’s when the insiders started loading up.
Here’s a quick list of the natural gas companies with significant insider buying in the last six months:
| Company |
Symbol |
Amount |
| Chesapeake Energy |
CHK |
$27 million |
| Houston Exploration |
THX |
$8 million |
| PetroHawk Energy |
HAWK |
$1 million |
| Enbridge Energy |
EEQ |
$800,000 |
| Apache |
APA |
$694,000 |
| Energen |
EGN |
$500,000 |
| Markwest Hydrcarbon |
MWP |
$250,000 |
| Forrest Oil |
FST |
$200,000 |
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Number one on the list, Chesapeake Energy’s (CHK) primary buyer is CEO Aubrey McClendon. At face value, his purchases are incredible.
The only problem is that as of Dec. 31, 2005, he had $91 million in unexercised options. So at any time, he could cash in these options, buy shares, and have it appear as though his purchases were open market transactions like you or I would make. McClendon’s also got $14 million in restricted stock awards due over the next four years. So Chesapeake isn't what I'd call a great insider opportunity.
I’d stick with the stocks further down the list. Several of these companies have solid insider buying, and are in confirmed uptrends.
And should a major hurricane threaten the Gulf of Mexico’s natural gas infrastructure, those uptrends could go a lot higher.
Good trading,
Graham Summers
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