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Horizontal drilling and hydraulic fracking have helped producers gain access to gas reserves, but energy prices have slumped.

Larry MacDougal/CP

Corporate insiders are increasingly confident that there are bargains to be had in the oil patch.

There are now just over five Canadian energy stocks with key insider buying for every one with selling, according to the latest tabulations by INK Research. That's based on filings made by officers and directors within their own businesses over the past 60 days.

At the start of October, when West Texas Intermediate crude prices were trading near $90 (U.S.) a barrel, insiders were only warming up. Back then, there were about two stocks with insider buying for every one with selling.

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INK Research, which applies ratings to sectors of the stock market just like analysts do to individual equities, today upgraded energy stocks to "undervalued."

Insiders are often early to the game when it comes to identifying overvalued and undervalued areas of the stock market. But there's more than just the continued pickup of buying in energy stocks that has the research firm encouraged.

Even as crude prices hit multi-year lows last week to below $75 (U.S.) a barrel, the iShares S&P/TSX Capped Energy ETF stayed above the 52-week low of $15.27 from Nov. 4. That suggests the Canadian energy equity sector began a bottoming process in mid-October that's continuing to stick.

While global crude prices continue to be under pressure, investors are seeing value in Canadian equities, which have some favourable things uniquely going for it right now - most notably a weaker domestic currency and more favourable differentials between Canadian crude product and world prices.

Another positive signal: chief financial officers of several energy stocks have been active in buying shares. These senior executives are highly knowledgeable of their companies and the markets they serve.

Stocks that have seen CFO buying include Black Diamond Group Ltd., Lightstream Resources Ltd. and Penn West Petroleum Ltd. (Click on the hyperlinks to see detailed breakdowns of insider buying activity for each.)

INK Research today also upgraded the TSX health-care sector to "undervalued." It noted that contrarian buying in some of out-of-favour stocks such as Extendicare is helping to boost sentiment.

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