William Smith, a director at Kinder Morgan (KMI) picked up 7,000 shares last month. That followed on a buy the week before by company Chairman Richard Kinder, who bought 373,233 shares.
While insiders have largely been buyers this year, the weak performance of the energy space means that these insider buys are currently at a loss, with a double-digit decline since the buys. That spells an opportunity for investors following the trades today.
With the massive insider ownership and ongoing buying at higher prices than where shares trade today, investors can bet on a continued recovery in the energy space. The sector is likely to heat up following a big M&A deal announced on Monday.
Action to take: Shares are an attractive buy here in the $12-13 range on valuation and starting dividend yield basis. But traders can expect a potential bounce here as stocks rotate away from big winners and into underperformers.
That makes the January 2021 $15 calls, trading for around $0.16, or $16 per contract, a great speculation here. These calls could easily hit triple-digit returns on a move higher in the energy space. Since most traders have already discounted that possibility, it’s an asymmetric bet that could pay off hugely with minimal downside.