Eye on Insiders: Sunoco

Watching insiders is like participating in a weeks-long stakeout. You expect something to happen, but you don't know what. So you settle in, sip your coffee, and wait for clues to solving the big case.

Here, the "case" is direction: Which way is your stock headed? The "clues" come in the form of insider buying and selling. Have a look at Sunoco (NYSE: SUN  ) over the past year.

Insider Rating

Very Bullish

All sales performed by one board member and at much higher levels than the stock trades for today. Three separate insiders have also bought over the past year.

Business Description

An oil refiner that operates convenience stores in 26 states stretching from the Eastern Seaboard to the Midwest.

Recent Price

$26.12

CAPS Stars (Out of 5)

***

Percentage of Shares Owned by Insiders

0.40%

Net Buying (Selling)*

($3.8 million)

Last Buyer (% Increase)

John Wulff, director

5,500 shares at $29.77 apiece on May 14

(Purchase bolstered direct holdings by 275%)

Last Seller (% Decrease)

John Drosdick, director

30,000 shares at $42.26 apiece on Dec. 30

(Sale represented less than 30% of remaining direct holdings)

Competitors

Hess (NYSE: HES  )

Frontier Oil (NYSE: FTO  )

CAPS Members Bullish on SUN Also Bullish on

Valero (NYSE: VLO  )

CAPS Members Bearish on SUN Also Bearish on

Holly Corp. (NYSE: HOC  )

Tesoro (NYSE: TSO  )

Recent Foolish Coverage of SUN

Holly Dances Through a Tight Spot

A Reversal of Refining Fortunes

Sources: Form 4 Oracle, Capital IQ, and Motley Fool CAPS. (Data current as of Aug. 25, 2009.)

* Open market sales and purchases only.

What we're tracking here, and why
Insider buying data can be confusing. Here, I'm concentrating only on buying and selling conducted in the open market. With most of these transactions, insiders control the timing. Other times, they're buying or selling under the purview of a 10b5-1 plan. Either way, personal holdings are being bought and sold.

Those personal holdings matter the most -- they're the shares executives hold for investment, rather than compensation. Employee stock options are different; they're compensatory in the purest sense. I've stripped out options-related buying and selling from the calculations you see above.

The Foolish view: very bullish
Last week, we looked at one of the world's largest integrated energy plays, a company that has been called the greatest in history: ExxonMobil (NYSE: XOM  ) . This time, we travel downstream to Sunoco, a well-positioned refiner that sports a meaty 4.6% dividend yield.

That's even better than it sounds. Sunoco has increased its dividend an average of 18% a year since 2004, enriching investors with the patience and smarts to reinvest for the long haul.

On the whole, CAPS investors appear to like the opportunity Sunoco affords at current levels. Only six of the last 75 Fools to rate the stock say it will underperform, three of which are All-Stars. But even these bears expect most of Sunoco's problems to be short-term. The implication? Today's investors will have to collect dividends as they wait for higher oil prices.

Or they can buy more shares, as some of Sunoco's insiders have. All three to have bought -- board member John Wulff, CEO Lynn Elsenhans, and Senior Vice President Michael Thomson -- have done so at higher levels than the stock trades for today. And the one insider who did sell, board member John Drosdick, sold in the $40s.

To me, that's positive action; it suggests insiders believe the stock is trading at well below fair value. But that's also just my take. Do you agree? Disagree? Log into CAPS today and tell us how you would rate Sunoco.

And if you want me to take a Foolish peek at the insider action of your favorite stock, email me here or use the comments box below. I'll write this column as often as you, our readers, demand. (And for the record, today's column was by reader request.)

For related Foolishness:

Fool contributor Tim Beyers is a member of the market-beating Motley Fool Rule Breakers stock-picking team. Try any of our Foolish newsletter services free for 30 days.

Tim owned shares of ExxonMobil at the time of publication. Check out his portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. The Motley Fool is also on Twitter as @TheMotleyFool. The Fool's disclosure policy has its eye on you.


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