We recently compiled a list of the 10 Large-Cap Stocks with Insider Buying in 2025. In this article, we are going to take a look at where Diamondback Energy, Inc. (NASDAQ:FANG) stands against the other large-cap stocks.
Insider buying is one of the strongest indirect signals that analysts and successful investors often use to assess whether a stock is undervalued or not. The intuition behind this stems from the fact that high-ranked insiders such as named executive officers and directors possess confidential information that may give greater visibility into the company’s future and growth trajectory. Insiders leverage such information as real-time data on sales and orders, and discussions with key clients, suppliers and other stakeholders, to form a better understanding of the company’s valuation. For instance, insiders often show net selling of their own company stock at peak valuations, just days or weeks before a major market correction happens; and vice versa, insiders often show net buying at or near market bottoms, days or weeks before the stock price starts to increase. This is clearly not a coincidence most of the time. Also, many successful investors emphasized the idea that insider buying is often a stronger signal than selling. Here is what Peter Lynch, one of the greatest ever, said on this topic:
“Insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise.”
With the US stock market having experienced a very strong bull market for the last 2 years, insider buying has become increasingly muted, with insider selling starting to prevail, especially in apparently overbought sectors like technology. This trend suggests that executives and institutional investors may see limited upside in certain high-flying stocks, prompting them to lock in gains. However, a significant portion of those strong returns have been driven only by a handful of companies, often called the “Magnificent 8”, which experienced an uplift from AI and other megatrends. At the same time, on an equal-weight basis, the US stock market has had a more modest performance. Some sectors like healthcare are at or near multi-year lows on a relative basis, driven by a combination of headwinds as well as a lack of tailwinds to the same extent as the technology leaders. The key takeaway for investors is that regardless of what point in the cycle we are, or how long into a bull market we are, both buying and selling opportunities will exist.
READ ALSO: 10 Technology Stocks with Insider Buying in 2024
The US stock market is still near its early 2025 all-time high and exhibits peak concentration and net insider selling. We believe that at such extreme points, when high valuation concerns are widely spread in the news, the signals provided by insiders buying their own company stocks are more valuable than ever. Their actions can indicate where genuine value exists beneath the broader market’s surface, highlighting sectors or individual companies that may be overlooked or undervalued. Insider buying in such an environment suggests confidence in a company’s long-term fundamentals, despite broader market uncertainties or short-term volatility. Investors who pay close attention to these signals may uncover opportunities in sectors that have lagged behind, offering potential for strong future returns as market conditions evolve. Last but not least, large-cap companies are usually widely followed and exhibit more price efficiency; consequently, insider buying signals in these stocks are even more relevant in our opinion.
Our Methodology
We used Insider Monkey’s insider trading stock screener to find large-cap stocks with at least two insiders buying shares worth at least $100,000 in the last six months. We believe that multiple insiders buying significant amounts of stock represents a higher chance that insiders have high confidence in the company. For all the companies, we also include the number of hedge funds tracked by Insider Monkey, as of Q4 2024, that own the stock. The stocks are ranked in ascending order of their hedge fund holdings.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A pipeline worker overseeing the flow of crude oil into storage tanks from an integrated water system.
Diamondback Energy, Inc. (NASDAQ:FANG)
Number of Hedge Fund Holders: 54
Diamondback Energy, Inc. (NASDAQ:FANG) is an independent oil and natural gas company specializing in the acquisition, development, exploration, and exploitation of unconventional, onshore oil and natural gas reserves in the Permian Basin of West Texas and New Mexico. The company focuses on the development of the Spraberry and Wolfcamp formations in the Midland Basin, as well as the Wolfcamp and Bone Spring formations in the Delaware Basin. FANG also owns and operates midstream infrastructure assets in the Midland and Delaware Basins, providing services under long-term, fixed-fee contracts.
Diamondback Energy, Inc. (NASDAQ:FANG) demonstrated strong capital efficiency in their operations, with the ability to produce the same free cash flow at $67 per barrel compared to $76 last year, achieved through improved efficiency and accretive deals. The company is executing a significant DUC (Drilled but Uncompleted wells) drawdown plan, which contributes to approximately $200 million in capital savings for the year. On the M&A front, the company views the Double Eagle transaction as potentially the last meaningful opportunity in the core of the Midland Basin, signaling a shift towards focusing on share repurchases and reducing enterprise value.
The company’s financial position remains strong, generating approximately $20 per share of free cash flow at $70 oil in 2025, representing a 12.5-13% yield at current prices. Regarding asset sales, Diamondback Energy, Inc. (NASDAQ:FANG) has committed to $1.5 billion in noncore asset sales, primarily focusing on equity method investments and midstream assets, without selling operated acreage. The company is also actively pursuing innovative opportunities in power generation, working on potential partnerships with hyperscalers for data centers that could utilize its gas while providing power solutions for their operations. The potential upside arising from such opportunities is reinforced by significant insider buying in the last six months.
Overall FANG ranks 5th on our list of the large-cap stocks with insider buying in 2025. While we acknowledge the potential of FANG as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than FANG but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.