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Insider buying of Canadian energy stocks has spiked to the highest level in nearly eight months, as officers and directors within the industry go bargain hunting amid tumbling prices.

The S&P/TSX Capped Energy Index Fund ETF is down 14 per cent from its mid-June high of $21.50, which includes a 0.75 per cent decline Tuesday alone, as U.S. crude oil prices fell to nearly two-year lows.

The energy insider sentiment indicator tabulated by INK Research, which tracks insider buying and selling filed over the last 60 days, is now at 170 per cent. That's the highest its been since Feb. 4, just prior to this year's powerful rally in energy stocks, Ted Dixon, CEO of INK Research, tells Inside the Market.

At 170 per cent, there are 1.7 stocks with key insider buying for every one with selling. The indicator started this month just above the 100 per cent level, with buying and selling nearly equally matched.

Interestingly, Canadian insiders in the energy sector have been responding much more positively to the recent sell-off than their counterparts in the U.S., according to Mr. Dixon. INK has an energy indicator that tracks the U.S. market, and it's sitting well below 100 per cent. "Improving spreads for certain blends of Canadian crude along with a lower loonie are two factors likely helping to drive the divergence in sentiment between insiders in Canada and the U.S.," he suggests.

The relatively higher interest to buy energy stocks in Canada echoes arguments made by Sprott portfolio manager Eric Nuttall in a blog post for Inside the Market on Friday. Mr. Nuttall noted that when the positive impact of the falling loonie and the shrinking of the Canadian light differential is considered, the price of oil in Canada is down much less than the global market price would suggest. Mr. Nuttall, who runs the Sprott Energy Fund, said Canadian energy stocks now appear to be "very undervalued" and that the risk-reward in the energy sector is the best he has seen in years.

Canadian insider buying in the energy sector appears to be concentrated among selective stocks, however, and driven by companies that have strong business plans, said Mr. Dixon.

Three stocks he highlighted with strong insider buying interest are Pine Cliff Energy Ltd., Inter Pipeline Ltd. and Surge Energy Inc.

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