Two Insiders Buy Shares at Devon Energy
Posted: March 14, 2023
March 13, 2023 (Maple Hill Syndicate) –- The CEO of Devon Energy (DVN), Richard Muncrief, made two purchases of his own company’s stock in February.
That’s intriguing, because the price of oil and natural gas have been falling lately. Shares of Devon, the 18th-largest U.S. energy company by market value, are down more than 18% in the past month and are 34% below their high, reached in 2014.
Muncrief paid $797,800 to buy 15,000 shares.
Another recent buyer of Devon shares is John Bethancourt, a director at Devon and an executive vice president at Chevron Corp. (CVX). He bought 4,706 shares of Devon in February. According to Gurufocus.com, Bethancourt doesn’t own any Chevron shares.
I don’t want to blow the significance of these trades out of proportion. Muncrief’s recent purchases are a drop in his very full bucket: He owns 1,978,977 Devon shares, worth about $102 million. And several Devon insiders have sold shares this year.
Still, I interpret the February trades as a bullish sign. Muncrief hadn’t bought any shares in the past five years.
Devon looks attractive to me. Its net profit margin has been fat lately (31%), and its return on equity has been impressive (59%, although that’s likely to fall).
Even better, for a bargain hunter like me, the stock sells for only six times earnings. The average multiple over the past decade has been 11. And the U.S. stock market as a whole is selling for about 18 times earnings.
Investors are scratching their heads figuring out what to do about energy. It was far and away the market’s strongest sector last year, up 64% while almost everything else was down. This year, however, it’s been weak.
I’m an energy bull. One reason is that the U.S. rig count (the number of oil and gas wells working) stands at 746, down from a peak of about 1900 in 2014.
A mid-capitalization stock that looks interesting is Stifel Financial Corp., based in St. Louis, Missouri. It’s a brokerage house, investment bank, and investment advisory firm.
Stifel has been an acquisitive company absorbing over the years the likes of Keefe, Bruyette & Woods; Legg Mason Capital Markets; Ryan Beck; and Thomas Weisel Partners Group Inc.
Between acquisitions and organic growth, Stifel has increased its revenue about 11% a year the past five years, and grown earnings at a 29% clip. Last year, however, was tough for the stock market and for Stifel: Revenue fell more than 6% and earnings 20%.
Stifel’s debt-to-equity ratio is only 22%, which I consider nice and low. The stock sells for 11 times recent earnings, and I consider it a good value at the recent price of about $58.
Ronald Kruszewski, Stifel’s CEO, paid about $590,000 on March 10 to add 10,000 shares to his hoard. He owns 1,374,826 shares, worth more than $79 million at current quotes.
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 president and chief executive officer.
Farley sold 79,921 shares, which was only 4.9% of his holding. The other three executives sold from 4.9% to 42% of their shares.
Ford lost money last year, but analysts expect a profit this year. The stock sells for only seven times earnings, which is attractive. But I worry about the debt, which is more than three times the company’s net worth. That’s better than it used to be, but still worrisome in a time of rising interest rates.
Beginning in 1999, I’ve recommended 93 stocks where insiders were buying. On average, these have beaten the Standard & Poor’s 500 Total Return Index by one percentage point over the ensuing year.
I’ve recommended avoiding 27 stocks even though corporate executives were buying. Those have trailed the S&P 500 by more than 24 percentage points.
The 43 stocks in which I noted insider selling have trailed the index by a little more than one percentage point.
Finally, there were 14 stocks where I noted insider buying but made no recommendation, or an ambiguous comment. Those have beaten the index by 16 percentage points.
Bear in mind that my column results are hypothetical and shouldn’t be confused with results I obtain for clients. Also, past performance doesn’t predict the future.
Disclosure: One of my clients owns shares in Devon Energy. I do some brokerage business with a subsidiary of Stifel Financial.
John Dorfman is chairman of Dorfman Value Investments LLC in Boston, Massachusetts. He or his clients may own or trade securities discussed in this column. He can be reached at firstname.lastname@example.org.