Equities feel like they are getting somewhat overbought as the market continues to track higher in its quest to surpass its 2007 highs on the S&P 500. It is significantly harder to find good value in this market compared to a few months ago. Since insider buying is at about a third its level from a year ago, I am paying greater attention to companies that still are seeing insider buying. Here are two stocks with good growth prospects powered in large part by increasing domestic energy production that were recently bought by insiders.
Dresser-Rand Group (DRC) supplies equipment to the oil, gas, chemical, petrochemical and power-generation industries. Four reasons DRC looks like a solid buy at $58 a share:
- A company officer bought $1 million worth of new shares this month. It was the first direct purchase of the stock by an insider in more than a year.
- Earnings are on a sharp uptrend. The company earned $1.53 per share in 2011 and $2.35 in 2012. Analysts project a consensus EPS of $3.36 in 2013 and almost $4.44 in 2014.
- The company is well positioned to benefit from increased gas gathering operations driven by low domestic natural gas prices and has products that are suited for the liquefied natural gas industry as well.
- Revenues are expected to grow almost 30% in 2013 and more than 10% in 2014. DRC is priced reasonably at 13x 2014's expected earnings.
Murphy Oil (MUR) is an international oil and gas company with interests in the Gulf of Mexico, western Canada and Malaysia. Four reasons MUR looks like a bargain at $62 a share:
- A director bought more than $6 million worth of shares over the past month in three separate transactions, the first purchases by an insider in more than a year.
- The company is in the middle of a transformation into a pure play exploration-and-production concern. It sold off its U.S. refinery assets in 2011 and plans to spin off its retail assets this year. This strategy has unlocked shareholder value at competitors ConocoPhillips (COP), Marathon Oil (MRO) and now at Hess (HES)
- This transformation should result in greater production growth. The company guided to 200,000 barrels of oil equivalent per day (BOE/D) for 2013, a 3% rise over 2012. However, the company believes as the result of its paring back to only E&P; it can hit 300,000 BOE/D by 2015.
- Given this projected production growth, MUR is cheap at just under 10x expected 2014 earnings. The stock also yields 2%.
