What Insider Buys Mean at Clean Energy Fuels

Clean Energy Fuels  (NASDAQ: CLNE  ) co-founder, board member, and legendary oil man T. Boone Pickens made news in June when he bought Chesapeake Energy's (NYSE: CHK  ) remaining Clean Energy shares. As of this writing, Pickens owns 22 million shares, just under 25% of the company. 

According to an SEC form 4 filed on Sept 12, CEO Andrew Littlefair bought 127,000 shares recently, paying more than $1.5 million. Why is this important for investors? Let's take a closer look.

Sellers turned buyers?
Both Littlefair and Chairman Warren Mitchell routinely sell shares. Mitchell has sold some 80,000 shares over the past two years, while Littlefair has sold a whopping 524,000. However, like all things, without proper context it's easy to miss what's really going on. 

Mitchell's stock sales are all sales of grant options that are part of his compensation as Chairman. As to Littlefair, the 524,000 he's sold over the past two years don't look so bad when we add up the 400,000 in options he's received, plus the 127,000 that he just bought. As of this writing, Littlefair still owns more than 477,000 shares.  

The old saw about "many reasons to sell, only one to buy" comes to mind...

What's it mean?
While there's not any evidence to support this, the timing could very well indicate that the adoption of natural gas engines by shippers for their trucks is happening quickly. As of the last earnings call, the 400hp Cummins  (NYSE: CMI  )  Westport  (NASDAQ: WPRT  ) ISX12 G was just starting to roll off the factory lines. Activity at the Cummins Westport manufacturing lines could really be ramping up. 

And while Cummins, due to both its diversified nature in the heavy engine business and exposure to diesel and natural gas, is well set up for long-term growth, there's little doubt that both Westport and Clean Energy need to see fast uptake of the 400hp engine, and soon.

What doesn't it mean?
It doesn't mean that there's a big new deal in the works, like a long-term fueling contract with Procter & Gamble, or another major metro transit authority. Rest assured that Littlefair wouldn't be buying shares based on insider info like that. 

It also doesn't mean that anything has happened. Littlefair has routinely owned between 300,000 and 500,000 shares over the past several years. So it's not out of the realm of possibility that he just wants to have a larger stake in the business, and not reflective of anything specific happening right now. 

What's worth paying attention to
Natural gas is going to be a growing part of the energy picture in North America for the next several decades. Chesapeake reminded us of this in August's earnings report. The No. 2 natural gas producer in the US grew its NG production by 7%, while simultaneously driving the cost of production down 20%. And while oil is also a growing part of Chesapeake's business and generates more than half of revenues, natural gas is 75% of the actual production output. 

Additionally, both Westport and Cummins' earnings announcements in two months will give us clarity as to how uptake of the ISX12 G is going, and Clean Energy's own earnings call in early November will tell us how this is translating to fuel sales, and further opening of locations on America's Natural Gas Highway. The current quarter may not be critical to the future of natural gas as a transportation fuel, but it's the first full quarter with a viable engine available for the long-haul market. 

Final thoughts
It's not an automatic buy just because an insider adds shares, but in this case it's certainly a positive sign from Littlefair. With that said, depending on where you are with your position in Clean Energy, this may not be the best time to buy. If you don't have a position, opening a small one now makes sense. But I wouldn't back up the truck before we find out if the shippers are stepping up and buying NG-powered trucks, and we won't know that until November. 

 

America's Energy Boom
Record oil and natural gas production is revolutionizing the United States' energy position. Finding the right plays while historic amounts of capital expenditures are flooding the industry will pad your investment nest egg. For this reason, the Motley Fool is offering a comprehensive look at three energy companies set to soar during this transformation in the energy industry. To find out which three companies are spreading their wings, check out the special free report, "3 Stocks for the American Energy Bonanza." Don’t miss out on this timely opportunity; click here to access your report -- it’s absolutely free. 


Read/Post Comments (3) | Recommend This Article (7)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 20, 2013, at 4:46 PM, BlazerMania wrote:

    As you say, it may not be a good thing, but it certainly isn't a bad thing.

  • Report this Comment On September 21, 2013, at 1:40 PM, TMFVelvetHammer wrote:

    Blazer,

    I agree completely. It's still about execution, and I'm expecting Clean Energy to execute if the demand is there.

  • Report this Comment On September 27, 2013, at 2:10 PM, scotthauser wrote:

    There are quite a few positives emerging for Clean Energy.

    1.The partnership with Mansfield, a well established privately held company that delivers over a billion gallons of fuel to its clients annually, could result in a substantial increase in sales, possibly sooner than later, depending on conversion rates.

    2. The emergence of the Eagle LNG Partners....General Electric is convinced that Nat Gas consumption in the US is going to be very substantial in Transportation and Energy Production. General Electric Selected Clean Energy as a partner for a reason. This expands growth opportunities in transportation areas other than commercial trucks for CLNE. Rail and Marine applications could be huge.

    3. Federal Legislation. This is a real wild card. Senate Bill 1230 (S-1230) is sitting at 80% chance of getting out of committee. Although previous major federal legislation was defeated, there is a new component now. The States are aggressively backing Nat Gas in Transportation, moving ahead of the Fed. Remember this name...Ernest Moniz. He is the new Dept of Energy Secretary. He is pro Nat Gas. Obama knew that when he nominated him. He will push for federal backing of, in his words.."Natural Gas as a bridge to the future".

    4. There are many other positive indicators. Increased exposure in the Chinese market, Ford including the F-150 in its Nat Gas lineup, United Parcel Service conversion to Nat Gas over the road, insider buying, Westport Cummins going into full production on the 12L motors. The list goes on. Not so many negatives now. Momentum has finally shifted. Consumption is very likely going to increase rapidly in the US.

    CLNE short squeeze? Hair trigger.

Add your comment.

DocumentId: 2644986, ~/Articles/ArticleHandler.aspx, 4/16/2014 10:10:41 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement