Canadian energy stocks have underperformed the S&P/TSX index by 18 per cent over the past three years. Corporate insiders are signalling that’s about to change.
INK Research, which monitors buying and selling activity by officers and directors within their own companies, said today its energy indicator has reached 348 per cent. That’s a rise from 283 per cent just a week ago and means there are more than three oil and gas stocks with key insider buying for every one with selling.
“Insiders appear to be in an upbeat mood, suggesting that chances are good that Canadian energy stocks may break out of their funk,” said INK CEO Ted Dixon.
Mr. Dixon believes there are at least a couple of factors at play. Natural gas prices appear to have bottomed. And technological innovation in the exploration and drilling for energy resources have made more oil and gas finds economically feasible.
“Successful entrepreneurs are finding new ways to recover oil and gas in areas that even five years ago would have been unreachable,” he noted.
Mr. Dixon said the positive sentiment is personified by the buying activities of two oil patch entrepreneurs in particular: Calgary lawyer John Brussa and oil and gas executive Paul Colborne.
Mr. Brussa has been buying beaten-up shares of Penn West Petroleum Ltd., which recently went through a management shakeup as part of a strategy to protect its dividend, Mr. Dixon pointed out. And he’s also been buying shares in Long Run Energy Ltd., recently created through the merger of Guide Exploration Ltd. and Westfire Energy Ltd.
Mr. Colborne last week, either through the public market or private transactions, spent $2.9-million buying shares in the four companies in which he is a board member: Cequence Energy, Crescent Point Energy, Legacy Oil + Gas, and Surge Energy.
Overall insider market sentiment for the Toronto stock market remains upbeat this week. INK’s TSX indicator is now at 150 per cent, up from 136.6 per cent a week ago and 120 per cent two weeks ago.
The indicator is derived by taking the number of stocks with buy-only transactions over the last 60 days, and dividing that with the number of sell-only transactions. The indicator ignores stocks that have both buying and selling in an effort to give a more accurate reading.