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How to Invest in Energy- Using Insider Trends to Find Energy Sector Investments

Charlie Tian lays out some considerations when looking for energy sector stocks to invest in

March 20, 2020

Hi fellow investors,

In my last video, I showed you that you can use Insider Trend data to see whether it is a good time to buy stocks or not. I received questions from investors asking whether it was possible to use Insider Trend data for different sectors to decide whether or not it is a good time to buy stocks in that sector. The answer to that question is yes, you can.

If you go to the Insider Trend page on GuruFocus.com, you will see that the first row is for the overall market. It is compared with the S&P 500 ETF. As you scroll down you will see Insider Trend Buy/Sell ratios for different sectors. You will eventually come to the energy sector, which was the specific question that I received. You can see that for the Insider Buy/Sell ratio for the energy sector in 2008 there was a high ratio. The number was above 4. If you had bought here, you would have done pretty well as the market recovered. In 2014, the energy sector entered a bear market until today.

Today we can see a very high Buy/Sell ratio from the Insiders that has never been seen before. Today the Insider Buy/Sell ratio for the energy sector is above 9 on the chart. Apparently, the market is very pessimistic about the energy sector. The energy sector has been underperforming the general market for a long time. They have crashed much more than the general market and again during the recent market correction. The Insiders are very bullish about it and the Insider Buy/Sell ratio is very high. It has never been this high for the energy sector.

Maybe it is a good time to buy energy stocks. So where can you find energy stocks worth buying? Again look towards the All-in-One Screener. Once there you can select the energy sector from the industry drop down menu. Because we do not know where the market is going to go and the energy sector is currently weak we will want to look for companies with an above average balance sheet. You can filter for this by selecting a minimum financial strength of 6. You will also want to look for companies with a strong profitability rank so select a minimum of 6.

From there filtering to at least one Insider buy from the beginning of the year will help to narrow down your results. However, if you want to take things one step further, you can set the minimum amount of the purchase to $500,000. In my search, this narrowed things down to 26 companies to look at. Once you reach this point, you can see how many Insider buys have occured within those companies. This will be a good starting point for finding energy stocks to invest in.

Thank you again and please leave you questions and comments below and I will answer them as soon as I can.

Charlie Tian

You can access the Insider Trends and All-in-One Screener here:



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About the author:

Charlie Tian, Ph.D., is the founder of GuruFocus. You can now order his book Invest Like a Guru on Amazon.

Rating: 5.0/5 (2 votes)



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