Vistra Corp. (VST) has caught my eye recently because it appears insiders are busy buying up shares of this Texas-based electricity retailer and generator.
While insiders may sell stock for all kinds of reasons, open market buys can often indicate that they think the stock is good value, especially when the stock is dropping.
Vistra recently issued guidance revising down its adjusted Ebitda by $1.6 billion as a result of winter storm Uri. This negative guidance has helped push the stock down to 52-week lows.
A perusal of the Gurufocus insider page for Vistra confirms that ever since the winter storm in February, which caused wide-spread power outages in the lone star state due to lack of preparation for cold weather and an outdated grid, insiders have stepped up their buying, indicating confidence.
Insiders buying have included the Chief Financial Officer and Chief Executive Officer as well as several members of the Board of Directors. This is a powerful contrarian signal in the face of negative news, as these people are best placed to know the prospects of the company going forward. The size of the trades are substantial, so this is not just window dressing. The CFO recently bought $788,000 worth of stock and the CEO spent close to a million.
Conclusion
Vistra is a retailer of gas and electricity and a generator of electricity. Unlike regulated utilities, it is exposed to the whims of the market and earnings can fluctuate widely. Hence, its a risky stock as compared to traditional regulated utilities.
The fact that the insiders are buying the stock is, in my opinion, a positive signal that the company's prospects are not as bad as the market fears. Vistra also currently has a dividend of 3.47%, which should tide investors over until capital gains can be achieved.
Disclosure: The author at present does not own stock of Vistra Corp. but is consdering a long position.
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