GuruFocus has various tools and screeners available to make the quest for your next great investment a little bit more efficient. A tool that I am fond is the Double Buy screen. By employing it you can easily screen a list of stocks that have been tapped by both gurus and insiders. Both types of events tend to trigger my interest, but when they occur simultaneously, it is time to pay close attention. I regularly review the list, and today I want to highlight three stocks from the top 10 that really stand out to me because of the combined buying data.
EXCO Resources (XCO, Financial)
Recently surging upward, EXCO Resources Inc. is a $400 million market cap oil and gas company that mainly explores and operates onshore U.S. shale gas properties. With the oil price being what it is, the sector is greatly disliked and that may be why Prem Watsa (Trades, Portfolio), Jim Simons (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio) and Steven Cohen (Trades, Portfolio) are buying in. They bought at prices between 85 cents and $1.37 over the past three months. What really piqued my interest, though, is the heavy buying by director C. John Wilder, a U.S. energy industry executive who led his company in the largest leveraged buyout in the world in 2007.
Wilder is executive chairman of Bluescape Resources and chairman of Parallel Resource Partners, an energy investment fund with Carlson Capital, which invests in distressed oil and gas assets.
Wilder is has led two turnarounds at energy majors. One was as chairman of the board and CEO at TXU Corp., which ended with a leveraged buyout of around $45 billion. The first time was as CFO at Entergy Corporation (ETR, Financial). Back in 2010, the highly respected Harvard Business Review named Wilder 24th best CEO from a list of 2,000 CEOs of large public companies worldwide and considered him one of the best-performing CEOs in the world.
Wilder's confidence is especially interesting as the firm is heavily leveraged with $1.5 billion in debt. Its EBITDA is respectable at near $300 million, but the fact that it is almost as high as its market cap shows just how distressed the company is. Buying up companies at 6x EV/EBITDA tends to be a good deal and when they are distressed, large insider buying goes a long way insofar as showing confidence.
Consolidated Edison (ED, Financial)
Consolidated Edison is a regulated utility. The company's customers are concentrated around New York City and Westchester County, southeastern New York, northern New Jersey and northeastern Pennsylvania. Regulated means that the authorities set a number of its tariffs so it is unable to exploit high prices to the max but also tends to be protected on the downside. Ray Dalio (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio) and Jeremy Grantham (Trades, Portfolio) have recently acquired shares. The face value of the insider buying isn’t impressive at all. Insiders are only buying pitiful amounts of the stock. However, the insider buying is widespread among execs, not just the top brass, which is a good sign. Another good sign is the insider buying has continued even though the stock is surging upward, and perhaps most importantly it appears insider selling is falling off. Net buying is decidely more impressive than it has been in the past.
Consolidated Edison trades at 1.6x book value, 18x P/E and close to 10x on EV/EBITDA. Like most utilities it has quite a bit of debt at $14 billion, but its EBITDA at $3.5 billion looks healthy enough. Its forward annual dividend yield is around 3.75%.
Kronos Worldwide (KRO, Financial)
Kronos Worldwide produces value-added titanium dioxide pigments (TiO2). With TiO2 you can make coatings, plastics, paper, fibers, food, ceramics and cosmetics white, bright and or see-through. The $700 million market cap company owns and operates an ilmenite mine in Norway with a governmental concession for an unlimited term. In addition it makes and sells iron-based chemicals, which are co-products of the TiO2 process. Gurus Arnold Schneider (Trades, Portfolio) and Joel Greenblatt (Trades, Portfolio) have recently bought into the company. James Barrow (Trades, Portfolio) added to his position. Chairman of the Board Steven Watson has been frenetically buying although admittedly, it is not uncommon for him to buy.
The company is one of the least dangerous companies on this list when looking at the debt load of $352 million, which is offset somewhat by $126 million of cash. Its EBITDA is around $114 million. It trades at 1.5x P/B or 8x EV/EBITDA.
