According to a filing with the SEC, Avedick Poladian bought 5,000 shares of Occidental Petroleum Corporation (NYSE:OXY) on December 4th
at an average price of $73.43 per share. Poladian, who serves as COO of
real estate company Lowe Enterprises, is a member of Occidental’s Board
of Directors and after his most recent purchase owns a total of 30,000
shares of the company’s stock. Insider trading
filings, particularly insider purchases, can be good to track as
studies show that stocks bought by insiders tend to outperform the
market on average (read more about studies on insider trading).
The $61 billion market cap oil major had
its sales decline very slightly in the third quarter of 2012 versus
levels from Q3 2011. Slightly higher production was offset by lower
prices for natural gas and natural gas liquids. The higher production
also caused cost of sales and SGA expenses to come in higher, with the
result being that Occidental’s net income was down 22%. Sell-side
analysts don’t expect much of a rebound, but they also don’t expect the
company’s business to decline much further: their consensus earnings
estimate for 2013 matches Occidental’s performing on a trailing basis
very closely, and so the trailing and forward P/E multiples are both 10.
The market has been pricing oil majors very cheaply in general- Exxon Mobil Corporation (NYSE:XOM) and BP plc (NYSE:BP),
for example, are also in that same range- and we think that the
industry is a good source of value though Occidental is not necessarily
the cheapest stock. Occidental Petroleum Corporation also pays a
dividend yield close to 3%.
46 hedge funds and other notable
investors owned Occidental Petroleum Corporation at the end of the third
quarter of the year, which earned it a place on our list of the most
popular energy stocks among hedge funds (see the full rankings).
Billionaire David Shaw’s D.E. Shaw was one of the funds reporting a
position in the stock, increasing its stake slightly to 2.1 million
shares (check out D.E. Shaw's stock picks).
Renaissance Technologies, whose founder Jim Simons has become a
billionaire thanks to the fund’s success since inception, also bought
the stock and owned 1.2 million shares at the end of the quarter (find more stocks Renaissance Technologies has been buying).
We’ve mentioned Exxon Mobil and BP, and would also include Chevron Corporation (NYSE:CVX) and ConocoPhillips (NYSE:COP)
as additional choices in oil and gas. It turns out that on a trailing
basis Occidental is the most expensive of these five oil majors, if only
narrowly: the other four stocks have trailing P/Es in the 7-9 range.
However, these peers are generally expected to see their businesses
worsen next year and so Occidental finds itself more or less in the
middle of a similarly narrow range when pricing these stocks on a
forward earnings basis. In a way, this makes sense as this is a
commodity business and it’s not that likely that any of these businesses
will be increasing their production much more than any other. However,
we can’t help but think that the industry as a whole looks cheap. BP
offers the highest dividend yield of the bunch, at over 5%, and tends to
be cheap in terms of multiples as well; of course, this company is
suffering from poor sentiment after the Deepwater Horizon disaster.
Exxon Mobil and BP also joined Occidental on our list of the most
popular energy stocks.
We’re not sure if Poladian likes
something in particular about Occidental, or if buying the stock is just
a way to go long the oil and gas industry. We’re skeptical that the
company is the best buy- BP is cheaper and actually increased its
earnings last quarter versus a year earlier, while Exxon Mobil is about
the same price as Occidental and is the market leader. Those two
companies in particular look like more interesting opportunities for
future research.
Article Source: InsiderMonkey
Article Source: InsiderMonkey