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.
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.