Every week I run screens for insider buying and selling, and this week, a number of energy stocks have popped up … for the wrong reasons.
The simple task of screening reveals an enormous amount of information about markets and even the economy. You can see the people running the corporations that make up corporate America talking about business conditions via their checkbook.
Usually we see insider buying in stocks that have fallen out of favor, as insiders expect a rebound. And then we see selling in companies that have risen too far too fast, as insiders think some reversion to the mean may be in order.
In short: When you see insider buying at new highs or insider selling at new lows, it is a significant statement of an office or directors as to the condition of the business.
Right now we are seeing insider selling across energy stocks as prices tumble in dramatic fashion. That’s a huge, red flag to me — and I would take it as a sign that insiders don’t have much faith in a near-term recovery.
Here are three energy stocks in particular that stand out:
Energy Stocks That Insiders Are Selling: RSP Permian Inc (RSPP)
RSP Permian (RSPP) is an independent oil and natural gas company that operates in the Permian Basin of West Texas. Since August, RSPP has been expanding by buying acreage in a sub-basin of the Permian and have so far acquired more than 10,000 acres in the Midland Basin. The stock has actually done better than many competitors and is currently down just 17% over the past year.
It does not appear that insiders are all that confident of the future, as numerous insiders — including the company’s chief operating and financial officers — have made sales. While some of those sales have been automatic transactions, several of them have been one-time deals.
Of note, COO Zane Arrott made a significant sale in late November in which he disposed more than 75% of his holdings in the company.
Given the heavy selling, I wouldn’t bet on this company profiting from an oil price recovery soon.
Energy Stocks That Insiders Are Selling: Cimarex Energy Co (XEC)
Cimarex Energy (XEC) is an oil and gas exploration and production company with operations in Texas, Oklahoma and New Mexico. XEC had escaped much of the carnage in the energy space over the past year, but finally succumbed to heavy selling in December.
Insiders apparently do not expect the relative good times to continue, as several of them have been selling — six different officers and directors have sold stock in the past two months.
As long as oil prices are falling or even just low, don’t buy — after all, execs aren’t.
Energy Stocks That Insiders Are Selling: Range Resources Corp. (RRC)
Insiders are also selling at Range Resources (RRC). The company has extensive natural gas operations, including …
- 7,582 net producing wells and approximately 1.4 million net acres under lease in the Appalachian region
- 653 net producing wells and approximately 383,000 net acres under lease in the Midcontinent region
- Other gas gathering and transportation services in Pennsylvania
Range Resources has been feeling steady pain since late spring of last year, off more than 60% since May. However, insiders aren’t buying the dip — the CEO, CFO and COO have all sold shares on the open market over the past few months.
If you are looking for a stock to play a natural gas bounce, I would look for one where executives had greater confidence in the business and pass on RRC right now.
As of this writing, Tim Melvin did not hold a position in any of the aforementioned securities.
