Wouldn't Dip Into Apache Just Yet

An Apache (APA) board member has bought a swath of shares recently, so let's take a closer look. As a reminder, insider buying tends to correlate with outperformance, according to studies -- and this makes financial sense, since it's likely only high confidence in a stock would trigger an exec to expose themselves further to the company-specific risk. In his case, executive Randolph Ferlic picked up 10,000 shares of Apache through his IRA last week at an average price of $74.48. In early March, another insider was buying as well, making this a consensus insider purchase within a short time period -- a particularly bullish signal.

Oil-and-gas name Apache has $30 billion market in market capitalization, though it's more concentrated on oil than many other energy companies, to the tune of nearly 80% of its revenue last year. The company's total top line grew just 1% in 2012, and all the while operational expenses mushroomed -- and, even if we subtract out some abnormally high depreciation costs, pretax income sank 17%. As for valuation, the stock currently trades at 16x trailing earnings, though its forward price-to-earnings ratio is 8x. Wall Street analysts believe the causes of Apache's high costs will dissipate over the next several years, and that considerable earnings growth will result....329 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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