Insiders See Value in Slippery Oil Patch
The SPDR Energy Sector (XLE) plunged by as much as 4% in early trading yesterday, registering a new 52-wk low. The low water mark of 61.06 followed 10-consecutive days of above average trading volume, and was more than 16% below the 50-day moving average. By noon yesterday, the XLE recovered all of its morning loss. Commodity prices were not the catalyst. The underlying prices continue to fall with crude oil down 3% and natural gas off by more than 1%. RBOB gasoline is also a laggard with a decline of more than 3%.
Value investors are just finding it tough to sit on their hands. Insiders, who may be the best value investors of all, were scooping up shares last week. According to wsj.com, insiders bought $21.0 million in energy sector shares while selling only $16.6 million. This is a rare reversal of the typical insider selling pattern for all stocks.
Top purchases last week included Teppco Partners LP (TPP) for $7.6M, Continental Resources (CLR) for $3.7M, NuStar Group Holdings LLC (NS) for $2.9M. Filings this week revealed insider buys of National Oilwell Varco (NOV) for $475K, Abraxas Petroleum (ABP) for $38K, Breitburn Energy Partners (BBEP) for $41K, Encore Energy Partners LP (ENP $25K) and Panhandle Oil & Gas (PHX) for $14K. Two of the above names are high yielding limited partnerships. This segment of the energy sector has witnessed active insider buying over the summer (source: Knobias.com).
Dan Duncan, Chairman of Enterprise Product Partners, Enterprise GP Holdings and Duncan Energy Partners has been an active acquirer of equity in all three partnerships this summer.
September Share Purchases
| Company | Symbol | Amount | Insider | Positions |
| Teppco Partners | TPP | $7.6M | Thompson & Duncan | CEO & BO |
| NuStar Group | NSH | $5.0M | Greehy | BO |
| Enterprise Prod Partners | EPD | $497,000 | Dan Duncan | Chmn |
| Duncan Energy Partners | DEP | $982,000 | Dan Duncan | Chmn |
| Enterprise GP Holdings | EPE | $19,600 | Ordemann | COO |
| DCP Midstream Partners | DPM | $22,000 | Richards | Secretary |
| Quicksilver Gas LP | KGS | $218,200 | Bledsoe | Director |
| Encore Energy Partners | ENP | $824,400 | Brumley & King | Chmn & Dir |
| BreitBurn Energy Partners | BBEP | $116,700 | Moroney & Weiss | Directors |
| MarkWest Energy Partners | MWE | $153,900 | Semple | CEO |
August Share Purchases
| Company | Symbol | Amount | Insider | Positions |
| ONEOK Partners LP | OKS | $275,600 | Gibson & Petersen | CEO & Dir |
| Duncan Energy Partners | DEP | $1.8M | Duncan et al | Chmn & Dir |
| DCP Midstream Partners | DPM | $192,600 | Borer et al | CEO & Dir |
| Williams Partners LP | WPZ | $707,300 | Armstrong et al | COO & Dir |
| Quicksilver Gas LP | KGS | $10,700 | Gettig | Director |
| Breitburn Energy Partners | BBEP | $1.05M | Breitenbach et al | CEO & Dir |
| Encore Energy Partners | ENP | $543,000 | Brumley & King | Chmn & Dir |
| MarkWest Energy Partners | MWE | $400,100 | Wolf | Director |
The oil patch, like the financial sector, is under extreme selling pressure due to the wave deleveraging. Yesterday, Bespoke Investment Group reported all 39 of the S&P 500 Energy sector stocks were below their 50-day moving average. They identified NOV (see above) as the second worst performer, trading 33.6% below the 50-day MA. While we often look for bear markets to end in October, the current decline, driven by disappearing liquidity, suggests equity prices are already shooting through fair value levels.
Stock position: None.
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This article has 8 comments:
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einstein p fleet
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114 Comments
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Sep 17 11:23 AM-
jegan ;-)
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768 Comments
Sep 17 04:07 PMjegan ;-)
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Emerald
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178 Comments
Sep 17 05:36 PM-
Steven Ward
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213 Comments
Sep 18 09:08 AMNow it will slide the other way in an over-estimation of risk. Best buying is on the up swing. Add onlt to positions based on 5 straight trading days above the stock's 50 day MA.
Don't try to pick thre bottom. Who knows where it's at.
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dsrtwriter
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33 Comments
Sep 18 03:17 PMNo matter what happens to the price of oil over the next year or so, these companies have long term contracts, many made when oil was high, at nice rates. Those contracts will hold,because one day, maybe in a year,demand will catch up.The oil companies take a longer view of drilling and exploration, and all indicators are that drilling worldwide will increase.
The reality is that it is going to be a long time before the majority of our transportation needs will be met by non-fossil fuel vehicles. Even with improvements in gas mileage, there are going to be many more vehicles on the roads of India and China.
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einstein p fleet
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114 Comments
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Sep 18 06:03 PMI like stocks that have strong fundamentals, good management, monopolize their space, earn money, and have visibility. NOV fits the bill. It's a good investment and, when the market volatility is replace with some semblance of sanity, it should move dramatically higher.
Demand for oil may slacken, but it's still going to take more rigs to satisfy that demand. Oil at 95 dollars a barrel isn't cheap, so I do not expect that NOV will have to go to the government, hat in hand.
It's a quality company.
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capital pains
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29 Comments
Oct 01 06:39 PMis ever settled in our lifetime, NOV will certainly benefit immensely.
Right now and for the immediate future, a major hurdle for investors will be the unwinding of the hideous hedge funds who are deep into this stock.
Thus, thanks to the manipulating, nauseatingly greedy hedge funds, quality will be cast aside as hedge funds redemptions continue to soar.
Impossible to determine an entry point for NOV because of this situation.
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einstein p fleet
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114 Comments
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Oct 07 01:45 AMI'll buy them a drink at Harry's in five years to thank them for the opportunity to buy a quality company at a steep discount. If you have cash and time, NOV can make you a lot of money over the next few years. Don't get mad, get even --- or, better still, make a profit.