Over the past week Portfolio Manager David Miller had an interview with Barron’s where he discussed his stock picks. David Miller and his fund, Catalyst Funds, like to watch the corporate executives of a company. Miller is so confident in his approach that he created several funds based on watching insiders that are bullish on their own stocks. One of Miller’s funds is the Catalyst Insider Buying Fund (INSAX, Financial), which is a large-cap fund that looks for big name companies where insiders are buying.
Miller claims that this strategy of investing came from his University of Michigan professor, Nejat Seyhun, who is an expert on insider activity as an indicator of stock performance. Even though with the market this past year, there have been significantly more insiders selling than buying Miller’s funds continue to thrive. Miller’s fund has returned 36.68% over the past year, compared to the S&P 500’s 27.19%. Since the fund’s inception in 2011, it has returned an annualized 21.05%.
The following companies are the insider stock picks of David Miller:
“The length of time we hold a stock is determined on whether or not insiders are buying. If they sell, we’ll get out, and if they buy we’ll continue to stay long. Some long-held positions are Valeant Pharmaceuticals (VRX, Financial), Illinois Tool Works (ITW, Financial), Freeport McMoRan, Apache, Starbucks, Kinder Morgan, Automatic Data Processing (ADP), KeyCorp (KEY, Financial), Weyerhaeuser (WY, Financial).”
Kinder Morgan (KMI)
“Consider Kinder Morgan, where four insiders collectively bought over $50 million recently… Richard Kinder’s purchases exemplified his thought that the stock was undervalued—it was trading down at about $35 a share. It is still trading pretty cheap, and it has a big dividend.”
Insider Trading Activity:
Insider Trading Volume:
Most recently Kinder Morgan Chairman and CEO Richard Kinder added 828,324 shares to his stake in the company. He bought these shares at $33.37 per share for a total transaction amount of $27,641,172. Since his buy the price per share has jumped back up approximately 5.54%. Richard Kinder now holds on to over 242.7 million shares of Kinder Morgan stock.
Insider buying has increased for the company since the price has dwindled down from its previous 10-year highs.
Kinder Morgan is engaged as the energy transportation and storage companies in North America. Kinder Morgan is the largest midstream and the third largest energy company (based on combined enterprise value) in North America.
Kinder Morgan’s historical revenue and net income:
The analysis on Kinder Morgan reports that the revenue has been in decline over the past three years, it has issued $4.8 billion in debt over the past three years and the dividend yield is nearing a three-year high.
The company recently announced that its collaborative project with Valero Energy (VLO) is now fully operational and is transporting petroleum products from refineries in Louisiana to Mississippi.
The company recently announced its financial expectations for 2014 which reports the company’s expectations to:
- Generate approximately $6.4 billion in business segment earnings before DDA, an increase of about $750 million over the 2013 forecast.
- Distribute over $2.5 billion to its limited partners.
- Invest approximately $3.6 billion in expansions and small acquisitions.
- Almost $720 million of the equity required for the investment program is expected to be funded by KMR share dividends.
Kinder Morgan has a market cap of $36.76 billion. Its shares are currently trading at around $35.49 with a P/E ratio of 39.50, a P/S ratio of 3.96 and a P/B ratio of 2.80. The dividend yield of Kinder Morgan stock is 4.40%.
Apache (APA)
“Apache has also had some nice purchases…The thing that got us into it was a purchase by two directors at the firm.”
Insider Trading Activity:
Insider Trading Volume:
Most recently Director John Lowe added 1,000 shares to his holdings on Dec. 12. He added these shares at $86.04 per share for a total transaction amount of $86,040. Since his buy the price per share has gone up approximately 0.43%. Lowe now holds on to 4,434 shares of the company’s stock.
Apache stock has a strong history of insider activity. The company’s executives are consistently buying and selling shares of their stake.
Apache Corp. is an independent energy company that explores, develops and produces natural gas, crude oil and natural gas liquids. It has exploration and production interests in six countries, divided into seven operating regions: the U.S., Canada, Egypt, Australia, the U.K. in the North Sea and Argentina.
Apache’s historical revenue and net income:
The analysis on Apache reports that the company’s price is nearing a one-year high, the company has issued $6.1 billion over the past three years, the revenue has slowed down over the past year and its operating margin is expanding.
The Peter Lynch Chart suggests that the company is currently undervalued:
Apache has a market cap of $34.32 billion. Its shares are currently trading at around $85.96 with a P/E ratio of 12.80, a P/S ratio of 2.10 and a P/B ratio of 1.00. Apache had an annual average earnings growth of 12.5% over the past 10 years.
GuruFocus rated Apache the business predictability rank of 2.5-star.
Freeport McMoRan Copper & Gold (FCX)
“If you look at their activity, there was a $66 million purchase by the vice chairman of the board, a $29.2 million purchase done by a director, a $28.5 million purchase by the chairman, and purchases by other directors as well.”
Insider Trading Activity:
Insider Trading Volume:
Most recently there was insider buying for the company reported from several directors at the beginning of November and close of October. Both Advisory Director Bennett Johnston and Vice Chairman James Flores made notable buys at this time. The two brought in a combined 1,538,900 shares during this period.
To see more insider activity for Freeport McMoRan, click here.
The company deals in the mining of copper, gold and molybdenum. Its portfolio of assets includes the Grasberg minerals district in Indonesia, significant mining operations in North and South America, and the Tenke Fungurume minerals district in the Democratic Republic of Congo (DRC).
Freeport’s historical revenue and net income:
The analysis on Freeport reports that the company’s revenue has been in decline over the past five years, its dividend yield is at a 1-year low and its price is at a 1-year high.
The Peter Lynch Chart suggests that the company is currently undervalued:
Freeport-McMoRan Copper & Gold has a market cap of $37.36 billion. Its shares are trading at around $35.99 with a P/E ratio of 13.10, a P/S ratio of 1.80 and a P/B ratio of 1.80. The company’s dividend yield is currently at 3.5%.
David Miller’s top ten holdings as of Sept. 30, 2013:
- Valeant Pharmaceuticals International (VRX, Financial)
- Illinois Tool Works (ITW, Financial)
- Freeport McMoRan Copper & Gold (FCX, Financial)
- Apache (APA, Financial)
- Starbucks (SBUX, Financial)
- Zoetis (ZTS, Financial)
- Kinder Morgan Energy Partners (KMP, Financial)
- ADT (ADT, Financial)
- KeyCorp (KEY, Financial)
- Weyerhaeuser (WY, Financial)
You can read the entire Barron’s article here.
View more on insider trading on the GuruFocus Insider Trades Page here.
