With total insider buying topping the half billion mark the last 30 days have been a very heavy period of insider buying. Topping the list of stocks the insiders are buying is Occidental Petroleum (NYSE: OXY) and Exxon Mobil (NYSE: XOM) and the first at least is not too surprising. Occidental Petroleum has been on Warren Buffet’s Buy List for the last several quarters and he doesn’t seem to be letting up. In fact, the pace of transactions picked up in the 3rd quarter which, by the way, is only half over, and topped $1.23 billion for the period to date. This brings Mr. Buffet’s holdings to over 20% which puts him in a very strong position in regard to the company’s operations and the future of the share price.
Two reasons buy-and-hold Warren Buffet may wish to hold so many shares are Occidental Petroleum’s low valuation and outlook for dividend growth. The stock is trading at only 6X compared to slightly higher valuations for most of the energy sector and the capital return outlook is robust. The company cut its dividend in the wake of the pandemic and has yet to bring it back to the prepandemic level and cash flow is only on the rise.
The latest report left the analysts a little mixed but included better-than-expected revenue and earnings, high double-digit revenue growth, and roughly 900% earnings growth on a YOY basis. Looking at the balance sheet, the company’s cash position is down considerably over the last year but the total debt is down nearly 50% over the past three years leaving the cash flow in the best position its been in for many years.
Exxon Mobil Director Buys Back His Sold Stake
The insiders own a very small 0.04% of the total stock so their activity is more indicative of sentiment than anything else but, after years of inactivity 1 insiders made a big sale in Q1 of 2022 that was followed up by a big purchase in Q3. Director Jeffrey Ubben made both transactions so take the activity with a grain of salt, the takeaway, however, is Mr. Ubben took a loss on the activity and is helping to support the longer-term uptrend in the action.
More importantly, the institutions have been buying shares of Exxon Mobil and have been net buyers for the last 8 consecutive quarters. Their holdings are up to 54% of the shares and growing in the wake of its strong earnings report. Exxon Mobil delivered better than expected top and bottom line strength on top of a high-double-digit consensus expectation and is also on track for dividend growth.
The difference is that Exxon’s dividend has been more stable and was not only maintained throughout the pandemic but increased as well. Exxon Mobil is a high-yield that pays out nearly 4.0% compared to the 0.80% paid by Occidental at this time so the outlook for growth is less robust although just as positive. Exxon Mobil has been increasing for the last 19 years and at a low 3% CAGR for the last few, the next increase could be large in relation to past increases but nowhere near the triple-digits that Occidental Petroleum could produce if it increased to only half the prior payout.
The Analysts Push Exxon Mobil And Occidental Petroleum Higher
The analysts are pushing both Exxon and Occidental Petroleum higher in regard to the sentiment and the price targets. Both companies have seen their consensus ratings improve to a Moderate Buy from a Hold over the past year with price targets that are trending higher in the 12, 3, and 1-month comparisons. The difference is that Occidental Petroleum’s price target is still 10% above the price action while Exxon’s is only 5% so it may outperform in the nearer term. Longer-term, the price targets for both stocks should improve as oil prices and the outlook for revenue and earnings stabilize.