In the efficient U.S. stock market, fortunes are made and lost based on the right stock at the right time. In this context, three stocks have quietly captivated astute insiders’ attention. These companies, though diverse in their operations, share a common thread. They are the darlings of those in the know, the chosen few who understand the intricacies of the company’s specific fundamentals.
With its multifaceted portfolio, the first stands as a bulwark against market volatility, seizing opportunities in the global energy trade. The second one’s strategic metamorphosis has unlocked hidden value, while the third deftly navigates the high-stakes compression market.
The article explores the blueprints of these millionaire insiders, exploring why they are placing their bets on these three stocks. It dissects the companies’ strategies, fundamentals, and how they yield significant returns for insiders and investors alike.
Energy Transfer (ET)
One of North America’s largest and most diversified midstream energy leaders, Energy Transfer (NYSE:ET), has diversified business segments, including NGL, midstream, crude oil, interstate, and intrastate, that provide a shield against market volatility and generate significant profitability.
Despite challenging market conditions, the company leveraged its diversified portfolio to achieve record volumes in key segments. Energy Transfer has solidified its position as a leader in NGL exports. It is capturing approximately 20% of the global market share and nearly 40% of U.S. exports. This lead directly results from securing contracts, such as the second tranche of satellite contracts, and responding to increased international demand for natural gas liquids.
Additionally, the company’s focus on growth is evident through projects like the Lake Charles LNG facility, which secured a construction extension until December 2028. Furthermore, Energy Transfer is actively pursuing new export authorizations, exemplified by three non-binding HOAs with prominent players such as Chesapeake, Gunvor, EQT, and a Japanese customer.
These strategic initiatives ensure the company remains well-positioned in the Liquefied natural gas (LNG) market. Energy Transfer continuously optimizes its existing assets, as seen in the expansion plans for its Nederland and Marcus Hook export terminals. These expansions, costing approximately $1.25 billion, aim to add up to 250,000 barrels per day of export capacity.
Furthermore, Energy Transfer is actively exploring alternative energy projects, such as carbon capture and storage, in collaboration with Capture Point. This project, involving a Class 6 permit application with the EPA, demonstrates the company’s commitment to sustainability.
The non-binding HOAs for LNG off-take with key partners underscore the company’s efforts to build strong, long-term relationships with prominent industry players. Therefore, these partnerships diversify revenue sources and enhance Energy Transfer’s position in the LNG market. Finally, all these fundamental strengths may boost insiders’’ and investors’’ returns alike.
Exxon Mobil (XOM)
Exxon Mobil’s (NYSE:XOM) strategic reshaping of its business portfolio has played a pivotal role. The company’s concentration on high-return projects and divestment of non-strategic assets, such as the sale of the Billings refinery, has unlocked substantial value. It is yielding cash proceeds of approximately $2 billion year-to-date (YTD).
Also, Exxon’s consistent setting of production records is noteworthy. In the Permian Basin, the company achieved record production, demonstrating its acquired operational excellence and capacity for growth. The company’s strategic investments have been pivotal to its success. The “Growing the Gulf” initiative, pledging $20 billion over ten years to leverage the U.S.’s resource advantage, has borne fruit, with 11 of 13 projects now operational. These investments bolstered production and significantly contributed to the bottom line.
Notably, the company’s innovative partnerships, such as the CO2 off-take agreement with Nucor (NYSE:NUE) and the acquisition of Denbury (NYSE:DEN), have strategic significance. These partnerships enhance Exxon’s competitive position and provide viable solutions for hard-to-decarbonize heavy industries.
Further, Exxon Mobil’s focus on low-carbon solutions is a key pillar of its long-term strategy. By developing an advantaged, low-cost business in carbon capture, transport, and storage, the company is poised to capitalize on the global transition to a low-carbon economy. The planned acquisition of Denbury and the extensive CO2 pipeline network on the Gulf Coast align with this vision and create opportunities to reduce emissions on a significant scale.
Finally, the company’s robust cash flow from operations, totaling $9.4 billion in Q2 2023, provides a solid financial foundation. This liquidity supports growth initiatives and allows Exxon Mobil to distribute significant cash to shareholders through dividends and share repurchases, bolstering returns on insider holdings and investors.
USA Compression Partners (USAC)
USA Compression Partners (NYSE:USAC) ability to opportunistically procure and deploy new compression units and convert idle units to active status has significantly contributed to its value creation for stockholders.
During the second quarter of 2023, the company achieved a revenue-generating horsepower exit rate of approximately 3.35 million. This growth in active horsepower and improved utilization has allowed USAC to capture a larger share of the compression market.
Moreover, securing attractive pricing for new and legacy units in a tight compression market has been instrumental in USAC’s financial performance. The company has continued to place units under contract for extended tenors and at attractive pricing, positively impacting its revenue and profitability.
Fundamentally, USAC benefits from sustained demand for its natural gas compression services. It is driven by the ongoing oil and gas production cycle. Hydrocarbons remain vital to society’s well-being, and USAC’s compression services play a mission-critical role in transporting hydrocarbons to market centers.
The company’s services are directly linked to domestic hydrocarbon production, which is forecast to remain at record levels for the foreseeable future. USAC anticipates continued domestic oil drilling activity growth as crude oil prices remain favorable and worldwide inventories decline. This trend positions USAC to capture more market share.
Finally, the company’s capital investment strategy is flexible and adapts to market dynamics. For example, it shifted from converting idle units to ordering new ones in response to market tightness. Therefore, this approach allows USAC to optimize returns and efficiently allocate capital.
On the date of publication, Yiannis Zourmpanos did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.