Devon Energy And Stifel Insiders Are Buying Shares, Should Investors Follow Their Lead?

CEO of Devon Energy (DVN), Richard Munkriff made two purchases of his company’s stock in February.

This is intriguing, because the price of oil and natural gas has been falling lately. Devon Shares, 18^th—The largest US energy company by market value is down more than 18% in the past month and is down 34% from its 2014 high.

Muncrief paid $797,800 to buy 15,000 shares.

Another recent buyer of Devon shares is John Bethancourt, a director and an executive vice president at Devon. purlin

cvx
, He bought 4,706 shares of Devon in February. According to gurufocus.com, Bethancourt does not own Chevron shares.

I don’t want to blow the importance of these trades out of proportion. Muncrief’s recent purchases are just a drop in the bucket: He owns 1,978,977 Devon shares, worth about $102 million. And several Devon insiders have sold shares this year.

Nevertheless, I interpret the February trades as a bullish sign. Muncrief had not bought any shares in the last five years.

I find Devon attractive. Its net profit margin has been hefty lately (31%), and its return on equity has been impressive (59%, though it has potential to decline).

Even better, for bargain hunters like me, the stock sells for just six times earnings. The average multiplier over the past decade has been 11. And the US stock market as a whole is selling at about 18 times earnings.

Investors are scratching their heads to figure out what to do about energy. It was the strongest sector of the market last year, up 64% while almost everything else was down. Although this year it has been weak.

I am an energy bull. One reason is that the US rig count (the number of working oil and gas wells) stands at 746, down from a peak of nearly 1900 in 2014.

Stifel Financial
SF
(sf)

One mid-cap stock that looks interesting is Stifel Financial based in St. Louis, Missouri. It is a brokerage house, investment bank and investment advisory firm.

Stifel has been an acquirer that has acquired the likes of Keefe, Bruett & Woods, Legg Mason Capital Markets, Ryan Beck and Thomas Weisel Partners Group over the years.

Between acquisitions and organic growth, Stifel has grown its revenue nearly 11% over the past five years and grown earnings at a 29% clip. However, last year was a tough one for the stock market and Stifel: Revenue fell more than 6% and earnings fell 20%.

Stifel’s debt-to-equity ratio is only 22%, which I consider to be both good and low. The stock sells for 11 times recent earnings, and I consider it a good value at its most recent price of around $58.

Stifel CEO Ronald Kruszewski paid about $590,000 on March 10 to add 10,000 shares to his hoard. He holds 1,374,826 shares, which are worth over $79 million at current prices.

Ford (F)

Ford is making a big push into electric vehicles, but I suspect top executives there lack confidence in the near future. Four insiders sold some shares this month, including James Farley Jr., the company’s chairman and chief executive officer.

Farley sold 79,921 shares, representing only 4.9% of his holdings. The other three executives sold 4.9% to 42% of their shares.

Ford lost money last year, but analysts expect a profit this year. The stock trades at just seven times earnings, which is attractive. But I am worried about the debt, which is more than three times the company’s net worth. This is better than before, but still worrying in a time of rising interest rates.

previous record

In early 1999, I recommended 93 stocks where insiders were buying. On average, it has outperformed the Standard & Poor’s 500 Total Return Index by one percentage point in the year ahead. I recommend avoiding 27 stocks, even if corporate executives are buying. They trail the S&P 500 by more than 24 percentage points.

In the 43 stocks I noted, insider selling drove the index back a little more than one percent. Finally, there were 14 stocks where I observed insider buying but no recommendations or vague comments. It has beaten the index by 16 percentage points.

Keep in mind that the results in my column are hypothetical and should not be confused with the results I get for clients. Also, past performance does not predict the future.

Disclosure: A client of mine owns shares in Devon Energy. I do some brokerage business with a subsidiary of Stifel Financial.