As expected, I heard from some of my ardently political friends about Wednesday's column. It seems heresy to suggest that Tuesday's elections were anything but a tidal wave that will change the country and be fantastic for the stock market. I am sorry, but nothing is going to change anytime soon, and it's a non-event for the stock market. If anything, the president could be become more aggressive with executive orders now that the "Please keep your pen in your pocket request" from his party has expired. There is not going to be any pro-energy, low-tax or any other grand pieces of legislation any time soon. It is business as usual in Washington and the stock market.
The best course of action is to keep looking for stocks to buy at what may be bargain prices. My focus has not shifted since Tuesday and neither should yours. I am running screens and kicking over rocks in the dark corners of the market. Today, I ran one of my favorite screens and there are some interesting names worth exploration. When the CEO of a company is buying shares in the open market at cheap prices, my work has shown that this is a wildly bullish event most of the time. CEOs know more about conditions and prospects for the company than anyone else, so it's a big vote of confidence when they are buy the stock.
The first name on my list made me wish I were more confident of big changes in Washington. Peabody Energy (BTU) has been hurt by the current administration's war on coal, and the stock is down more than 40% this year. Peabody is one of the world's largest coal producers and is much better positioned than other U.S. coal companies to benefit from export markets. We may posture about coal in the U.S., but the rest of the world is going to burn the stuff, especially the emerging-markets countries. Eventually, this should provide a boost for Peabody. CEO Gregory Boyce and two other directors must believe the future looks better than today, as they have been buying shares in the open market. At 80% of book value, Peabody appears to be cheap enough for consideration by long-term, value-oriented buyers.
One of my favorite little banks also saw insider buying in the past month. Cape Bancorp (CBNJ) first came to my attention when Michael Price started buying shares a couple of years ago. The bank is in the Atlantic City, N.J., region and has been hurt by the casino troubles there. But expansion plans are moving the bank inland, with a good deal of success so far. It's focusing on commercial lending and avoiding the difficult and competitive residential lending markets. Its commercial-fishing-fleet lending business is doing well, as well. It's a profitable niche that the bank has been in for years, and it is the fourth-largest lender for commercial fishing boats and fishing-related business loans in the country.
As part of the expansion plans, Cape Bancorp recently agreed to purchase Colonial Financial Services (COBK) on very favorable terms. This allows Cape to diversify further from the Atlantic City market and grow. CEO Devlin is positive about his bank's future and he has been buying stock in the open market. The stock is trading around 90% of tangible book value and is one of my favorite Trade of the Decade banks.
EP Energy (EPE) is in what has quickly become a tough business. It explores for oil and gas in the shale fields of Texas, Louisiana and Utah. Falling oil prices have hurt the unconventional energy companies but the top two executives at EP Energy like their long-term prospects. CEO Brent Smolik and CFO Dane Whitehead have been buying shares in the open market. Like most of the U.S.-based oil and gas companies, the shares have been falling lately and are now trading around book value.
There will be lots of noise about the elections for a few weeks, and then the commotion will switch to holiday spending and 2015 predictions. The news flow around the markets is never-ending, and most of it doesn't matter much at all. Keep your head down and look for bargains; time and value should reward you in the long run.