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Kinder Morgan, Seattle Genetics And Others Insiders Have Been Buying

by
March 16, 2015 10:48 am
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Even with volatility having returned to the markets, insider buying of stocks remains strong of late, particularly among certain energy players. Diamond Offshore Drilling, Kinder Morgan and Seattle Genetics were among those that have seen significant insider buys recently.

Insiders may sell shares for any number of reasons, but conventional wisdom says that they really only buy shares of a company for one reason — they believe the stock price will rise and they want to profit from it. Pullbacks and sell-offs can provide a perfect opportunity for investors who have faith in a company to snap up shares.

American Homes 4 Rent

So far this month, one director has picked up 1 million American Homes 4 Rent (NYSE: AMH) shares at prices ranging from at $16.15 to $16.30. That cost around $16.2 million. These purchases came in the wake of a price target cut from Keefe, Bruyette & Woods.

This real estate investment trust has a market capitalization near $3.5 billion and a dividend yield of about 1.2 percent. The long term earnings per share (EPS) growth forecast is about 8 percent. Insiders own almost 40 percent of the float. Shares ended the week at $16.37, down almost 4 percent year to date.

See also: Cliffs Natural Resources Shares Respond — Slightly — To Insider Buy

Diamond Offshore Drilling

Last week, parent company Loews purchased more than 585,000 shares of Diamond Offshore Drilling Inc (NYSE: DO). At between $26.52 and $27.24 apiece, that came to more than $18.2 million. Also last week, Barron’s outlined some risk to Diamond Offshore Drilling.

This $3.6 billion market cap drilling services provider has an operating margin that is better than its industry average, but the price-to-earnings (P/E) ratio is in line with the industry average. More than half the shares are insider owned. Shares ended Friday at $26.71, after sinking to a multiyear low earlier in the week.

Energy Transfer Partners

Last week, a group chief financial officer purchased 20,000 shares of Energy Transfer Partners LP (NYSE: ETP) at $54.97 apiece. That cost him almost $1.1 million and doubled his stake. A proposed merger between Energy Transfer Partners and Regency Energy Partners is on the table.

This natural gas transportation and storage company has a dividend yield of about 7.3 percent and a market cap near $19.5 billion. The long-term EPS growth forecast is only about 6 percent. Shares have fallen more than 16 percent since the beginning of the year and ended last week at $54.41.

Kinder Morgan

On the same day it was announced that Kinder Morgan Inc (NYSE: KMI) would join the S&P 100 later this month, Chairman Richard Kinder stepped up and bought 100,000 shares at $39.50 apiece, for a total of $3.95 million. That brought his stake to more than 233.8 million shares.

This energy infrastructure giant’s market cap is about $85.0 billion, and it has a dividend yield near 4.5 percent. Its operating margin is greater than the industry average, but the return on equity is less than 6 percent. The stock ended the week at $39.92, which is still down more than 5 percent year to date.

Seattle Genetics

So far in March, one director has obtained more than 773,000 shares of Seattle Genetics, Inc. (NASDAQ: SGEN) for more than $25.5 million. The per-share price ranged between $34.54 and $34.84. The same director also picked up about $9.5 million of the stock in February.

The market cap of this biotechnology company focused on cancer treatments is about $4.7 billion. Note that its return on equity and operating margin are both in the red, and short interest is more than 16 percent of the float. However, the buys look well timed as shares closed Friday at $38.31.

See also: Lumber Liquidators Gains On BlackRock Investment, Citron Comments

Tallgrass Energy Partners

In three transactions, the chief executive officer accumulated 28,600 shares of this Kansas-based midstream energy company last week. At a share prices ranging from $46.61 to $47.70, that cost him more than $1.3 million. Tallgrass Energy Partners LP (NYSE: TEP) is less than 1 percent insider owned.

The market cap of this master limited partnership is around $2.3 billion, and its dividend yield is near 4.1 percent. The P/E ratio is less than larger competitor Kinder Morgan. At Friday’s close of $46.94, shares were about 5 percent higher than at the beginning of the year.

At the time of this writing, the author had no position in the mentioned equities.

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