Names in Gaming and Energy That Insiders Are Betting On

The market continues to yo-yo between depression and cautious optimism in reaction to the Covid-19 outbreak. This week has not been nearly as volatile as most of the last month, but equities continue to have significant moves in one direction or the other on a daily basis. Most of the nation is now sheltering in place, with many states under stay at home orders. The confirmed death toll in the U.S. has now crossed the 6,000 level, with half the fatalities in New York and New Jersey. It's a key reason I remain in Miami, plus if one is going to be stuck at home, an ocean view and a good grill on the patio are highly recommended. I continue to employ my Covid-19 investing game plan. I don't even look to put money to work unless the S&P 500 is down at least 3% that day. I also am only adding ammo to new or existing positions via covered calls as a risk mitigation strategy given the huge option premiums available throughout the market due to the large increase in market volatility. For new ideas I start with what stocks insiders are buying. One positive of the last month is insider buying has spiked to nearly the highest level since the financial crisis. I think this is nice vote of confidence in the nation's long-term future, and I always feel better when company officers have skin in the game. Here are two names I plan to tee up during the next dip in the market. Let's start with MGM Resorts International . Like all hospitality and gaming concerns, MGM shares have been plastered recently. The stock sells for about one third the level it did just six weeks ago. Obviously, MGM has been hurt badly by the lockdown of Las Vegas, where it gets half its revenue. MGM has taken steps to conserve cash, such as cancelling a planned $1.25 billion stock repurchase program. I plan to do some covered calls on MGM on the next down day in the market. MGM ended 2019 with about $2.4 billion in cash on the balance sheet. While it carries more than $10 billion in debt, little of it is due in the near term. In addition, China, where the company gets almost a quarter of its revenue and a much bigger portion of growth and earnings, is beginning to start up again. Several insiders bought almost $15 million of shares in the last couple days in March. These are the first insider purchases of 2020 and a nice vote of confidence in MGM, the stock of which also yields 5%. Few parts of the market have seen more insider buying in recent weeks than the midstream energy sector. The whole energy complex has been crushed in 2020 due to falling demand and declining energy prices. Energy Transfer LP is one of many midstream names that has been taken to the woodshed and beaten like a rented mule. The shares now trade at their lowest levels since the depths of the financial crisis in early 2009. Myriad insiders bought what looks to be around $20 million of ET units in March. Energy Transfer yields 23% at current levels. The company just declared its normal quarterly dividend at the end of March. This was a nice vote of confidence, but I could see a dividend cut in the future if the current madness continues over the next few months. However, that possibility seems priced into ET already. Neither MGM nor ET is for the faint of heart, which is why I am using long-dated covered calls. However, provided some normalcy has returned to the market and the nation over the next six months, I think both names will be prudent investments at these levels. Insiders sure seem to think so given recent purchases.

Names in Gaming and Energy That Insiders Are Betting On

MGM Resorts International and Energy Partners are in unrelated businesses but have a spate of recent insider purchases in common.

Columnist Conversation

This Weekend on Real Money

Still Outperforming on a Long-Term Basis

Insider Buys in Two Stocks I Like

COLUMNIST TWEETS

Please Join or Log In to manage and receive alerts.