Insider Trading Reports: Encana (ECA)

Multiple insiders buy after earnings.

Following its quarterly earnings report and the end of a lockout period for insiders to buy up shares, a number of insiders at Encana (ECA) started to add to their stake at the company.

Insider buys included a CEO buy of 12,500 shares, and three directors, who bought nearly 80,000 shares in total at varying prices just under $4 per share. Data on insider activity shows only one small sale in the past two years with many clusters of buying.

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  • Encana shares have lagged the rest of the energy market in the past year, with a slump of 53 percent. Despite that drop, the company trades for just about 7 times forward earnings and trades at a reasonable value relative to its assets.

    Action to take: The company has been performing well operationally despite the decline in shares, making them look somewhat undervalued. While oil prices have been heading up, buying a laggard here makes some sense. Shares look attractive up to $5.00.

    Speculators betting on the post-earnings move higher may want to consider the April 2020 $5 calls. Trading at just $0.40, or $40 per contract, they’re a cheap bet on prices heading higher, and a spike in energy prices could easily turn this bet into a double or triple. Without such a move, mid-double-digit returns could be expected.