Despite last week's turbulence, several company insiders took advantage of the market weakness to aggressively add to their holdings. While it's not possible to know their motivation, studies have shown that stocks with significant insider buying tend to outperform over a 12 month period. I've combed through last week's SEC Form 4 reports and arrived at a list of four companies whose insiders made what I feel are the most significant purchases:
SunEdison Inc (NYSE:SUNE)
SunEdison shares have been hit hard since the company announced the acquisition of rooftop solar developers Vivint Solar Inc (NYSE:VSLR) and Mark Group and posting disappointing quarterly results with a massive $256 million net loss that exceeded analyst estimates by a wide margin. Shares have dropped nearly 68% since hitting a 52-week high of $32.13 on June 23 and insiders apparently see value.
Chairman Emmanuel Hernandez added 10,000 shares at an average price of $ 9.95 last Tuesday, bringing his total holdings to 79,000 shares. He also bought 20,000 shares on Aug. 21 with the purchases together representing a 61% increase to his holdings. CFO Brian Wuebbels also scooped up some shares on Aug. 21, adding 50,000 at an average price of $11.19, which was a 24% increase to his holdings. They were accompanied by directors Peter Blackmore, Clayton Daley, and Randy Zwirn, who added 8,700, 6,100, and 2,500 shares respectively.
It's worth noting that these were the first purchases of the company's stock in years by the Chairman and a reversal in sentiment by the CFO, who sold shares at a much higher price last August.
Investors buying shares in SunEdison are betting the company's aggressive expansion can eventually lead to profits and positive cash flow and hoping low natural gas prices, which have reduced the appeal of solar energy, will return to historical levels.
Sotheby`s (NYSE:BID)
Sotheby's shares have been hit hard recently due to fears that the slowdown in China will have a negative impact on the company's high-end auction business and disappointing quarterly results that missed analyst estimates for sales and earnings by a wide margin. The company's shares have lost over 23% since hitting a 52-week high on June 23 and insiders are taking advantage of the weakness.
Analysts have yet to see a slowdown in consumer spending in China, and it's believed the growing market for Western art has remained fairly strong despite the carnage in the Shanghai stock market but there is obviously concern that wealthy Chinese bidders who are sitting on huge paper losses may begin to curtail their spending.
Director Dennis Weibling purchased 5,000 shares this week at an average price of $35 a share. This brings the number of shares he's purchased this month to 30,000, an increase of 120% to his holdings. He was joined by directors Domenic de Sole, who bought 13,165 shares (a 329% increase to his holdings), and Kevin Conroy, who made an initial purchase of 3,000 shares.
CEO Thomas Smith Jr., who recently joined the company, made an initial purchase of 43,629 shares for his own account and added another 17,230 for family members. This could be a good opportunity to pick up shares at a discount as the disappointing results were partly due to a couple of one-off events, such as the rescheduling of a major auction for the third quarter and an expensive painting that sold for far less than anticipated.
Activist investor Dan Loeb has a large stake in the company and has been agitating for management changes along with improved profits.
Western Refining Logistics LP (NYSE:WNRL)
Western Refining Logistics operates terminals, storage tanks, pipelines, and other logistics assets in the American Southwest. Director David Kinder bought 5,000 units last Monday at an average price of $ 22.41, boosting his holdings by 74%. He was joined by Director Andrew Atterbury, who made an initial purchase of 20,000 units from Aug. 20-21.
CEO Jeff Stevens bought 86,000 units at prices ranging from $23.94 - $24.18 earlier this month. This was a significant buy both in dollar terms ($2 million) and in the percentage increase to his holdings (732%). Mr. Stevens also owns 63,847 phantom units which vest ratably over the next 5 years into an equal number of common shares. Even with those included, the purchase represents over a 115% increase to his total holdings.
Two other executives also purchased shares in August: Senior VP of Operations Matthew Yoder, who bought 5,000 at an average price of $24.82 for a total of $124,085 (representing a 78% increase in his holdings), and Senior VP and Treasurer Jeffrey Beyersdorfer, who bought 1,000 units at an average price of $24.
The recent oil swap agreement with Mexico, a possible lifting of the crude oil export ban, along with growth in the emerging San Juan basin could create more demand for the company's pipelines and storage tanks in El Paso, TX and Gallup, NM. It's important to note that since Western Refining is a limited partnership, you'll receive a K-1 not a 1099, so you may want to consult with a financial advisor about tax implications.
WPX Energy Inc (NYSE:WPX)
WPX Energy shares have been clobbered since hitting an all-time high of $26.62 in August of last year and have fallen 50% since May 8, affected by the swoon in energy prices. Insiders stepped up to the plate in a big way during last week’s turbulent market action. Senior VP of Operations Clay Gaspar picked up 35,000 shares from $5.51 – 5.52 a share (an over 40% increase to his existing holdings) and General Counsel Dennis Cameron made a modest purchase of 1,800 shares. CEO Richard Muncrief also purchased shares in July and August, adding 70,000 shares, boosting his holdings by over 20%.
The shale driller is in the midst of a restructuring to focus on liquids-rich formations and recently acquired acreage in the Permian Delaware formation. The company also owns acreage on the Fort Berthold reservation in the core of the Bakken, the emerging San Juan play in New Mexico, and the gas-rich Piceance Basin. They have embarked on an aggressive asset divestment program, recently announcing the sale of their pipeline gathering assets in the Bakken, and are expected to seek a buyer for their Piceance acreage.
Since it paid a premium for the Delaware acreage and its hedges begin to roll off in 2016 (50% of its oil production is hedged next year at an average price of just $62/bbl), a sustained period of depressed oil prices would severely impact its cash flow. However for investors wanting exposure to the Permian basin, WPX shares may be a bargain priced at an EV/EBITDA ratio of just 2.5.