Two High-Yield Dividend Stocks and One Uranium Stock Register Noteworthy Insider Buying

U.S equities closed in the red on Monday, pushing both the NASDAQ and the S&P 500 into negative territory for the month of February. The two indexes registered their third losing months in a row, a streak not seen since a rough five-month streak that ended in September 2011. However, the Dow Jones Industrial Average gained 0.3% in February, after plummeting by 5.5% in January. The S&P 500 has also lost 5.5% year-to-date, after declining by 0.4% in February. The Chicago Board Options Exchange (CBOE) Volatility Index, which is known as the “fear gauge”, jumped above the 20-level on Monday, suggesting that the market is experiencing a great deal of short-term fear and stress. Nonetheless, recent U.S economic data suggests that the nation’s economy continues to be strong, which makes us think that U.S equities will most likely embark on a turnaround in the near future should the economy keep growing. Individual investors are definitely seeking bargains in the market at the moment, and insider buying executed by downtrodden companies’ executives might be the perfect place to begin looking for bargains. The Insider Monkey team analyzed a bunch of Form 4 filings submitted with the SEC this week and identified three companies with noteworthy insider purchases. Two of these stocks in particular seem to represent attractive investment opportunities.

Academic research has shown that certain insider purchases historically outperformed the market by an average of seven percentage points per year. This effect is more pronounced in small-cap stocks. Another exception is the small-cap stock picks of hedge funds. Our research has shown that imitating the 15 most popular small-cap stocks among hedge funds outperformed the market by nearly a percentage point per month between 1999 and 2012 (read more details here).

Let’s begin our discussion with Ur-Energy Inc. (USA) (NYSEMKT:URG), which recently had one of its insiders purchase a sizable block of shares. Chairman and Chief Executive Officer Jeffrey T. Klenda bought 1.00 million shares on February 17 at a purchase price of $0.50 per share, boosting his overall holding to 2.83 million shares. This block of shares was acquired through a bought deal financing, under which the company sold 12.92 million common shares for $0.50 per common share. The exploration stage mining company will use the net proceeds from the offering to advance its operations and development of the Lost Creek Project, which is an in-situ recovery (ISR) uranium mine, as well as pay ongoing debt service obligations and cover general corporate expenses. Ur-Energy Inc. (USA) (NYSEMKT:URG) sold 925,000 pounds of U₃O₈ during 2015 at an average price of $45.20 per pound, compared with 517,760 pounds sold during 2014 at an average price of $51.22. The company’s gross profit from uranium sales totaled $12.5 million for 2015, up from $11.5 million reported for 2014. Ur-Energy’s financial performance was impacted by the low spot price environment. Meanwhile, the shares of Ur-Energy have lost 47% over the past 12 months, after declining by 29% year-to-date. The average spot price per pound of U₃O₈ for the week that ended February 22 reached $33.50, so the company plans to maintain production at levels consistent with its 2016 contractual sales obligations should the low spot price environment stick around. This means that Ur-Energy will sell roughly 662,000 pounds at an average price of $47.61 per pound in 2016. Ken Griffin’s Citadel Advisors acquired a new stake of 208,511 shares in Ur-Energy Inc. (USA) (NYSEMKT:URG) during the December quarter.

The next page of this article discusses the recent insider buying witnessed at Ares Capital Corporation (NASDAQ:ARCC) and Genesis Energy L.P. (NYSE:GEL).

Ares Capital Corporation (NASDAQ:ARCC) also saw one of its top executives purchase a sizable block of shares recently. Co-President Mitchell S. Goldstein snapped up 19,200 shares on Thursday at prices that ranged from $12.95 to $13.00 per share and currently owns 182,740 shares. The specialty finance company that operates as a business development company (BDC), has suffered a 21% decline in its stock price over the past 52 weeks. The BDC primarily invests in first lien senior secured loans, second lien senior secured loans and mezzanine debt, which may also include equity components such as warrants. Ares Capital’s net asset value per share as of December 31 equaled $16.46. Therefore, the shares of the BDC are currently trading at a discount of 17% to their net asset value per share, which might serve as an explanation for the recent insider buying registered at the company.

Ares Capital Corporation generated total investment income of $1.03 billion during 2015, up from $989 million delivered in 2014. The increase was mainly attributable to an increase in the size of the BDC’s portfolio. There are a few more reasons investors might want to pour some cash into the company’s stock. For instance, the stock is priced at 8.27-times expected earnings, nearly half of the forward P/E multiple of 16.15 for the S&P 500 benchmark. Moreover, Ares Capital Corporation pays out an annualized dividend of $1.52 per share, which denotes a current dividend yield of 11.25%. Individual investors hunting for income stocks could find Ares Capital an extremely attractive investment opportunity, considering the recent insider buying, the discount-to-book value, cheap P/E multiples, and attractive dividend yield. Israel Englander’s Millennium Management reported owning 977,474 shares of Ares Capital Corporation (NASDAQ:ARCC) through its most up-to-date 13F.

Genesis Energy L.P. (NYSE:GEL) had one member of its Board of Directors buy shares this week. Director Jack T. Taylor purchased 10,000 class A shares on Monday at a cost of $24.77 per share, lifting his overall stake to 12,865 shares. The master limited partnership (MLP), which is focused on the midstream segment of the crude oil and natural gas industry in the Gulf Coast region, has seen its shares decline by 30% since the beginning of 2016 despite gaining nearly 7% on Monday. Indeed, the decline in crude oil prices has impacted the company’s revenue in recent quarters, but its segment margins (revenue minus production costs, operating expenses, and segment general and administrative expenses) have not suffered from this outcome. Most of Genesis Energy’s revenue and costs are derived from the purchase and sale of crude oil and petroleum products, so its margins are not under significant pressure.

Genesis Energy L.P. has two distinct types of operations: its onshore-based, refinery-centric crude oil and refined petroleum products transportation and related operations; and its offshore Gulf of Mexico crude oil and natural gas pipeline transportation and handling operations. This distinction is of crucial importance, as the shippers on the company’s offshore pipelines are represented by large independent energy companies that developed large-reservoir, long-lived crude oil properties that are economically viable even when crude oil prices trade near multi-year lows. This means that the MLP’s margins are not likely to suffer in the upcoming months and years. Genesis Energy’s total segment margin totaled $476.59 million for 2015, up from $347.26 million reported for 2014. The increase was mainly attributable to a higher segment margin from offshore pipeline transportation. The shares of Genesis Energy are trading at 12.93 expected fiscal year 2017 earnings, below the forward P/E ratio for the S&P 500 Index. More importantly, the MLP pays its shareholders an annual dividend of $2.62 per share, which represents a current dividend yield of 10.93%. Stuart J. Zimmer’s Zimmer Partners owns 190,000 shares of Genesis Energy L.P. (NYSE:GEL) as of December 31.

Disclosure: None