Insider Purchases & Buybacks: GDP

Insider purchases can often be viewed as people inside the company seeing value in their own stock. Goodrich Petroleum (GDP - commentary - Cramer's Take) is one such company that has recently seen some active insider purchases. Director Josiah Austin bought 270,000 shares of the company in December for a price range of between $22.54 and $23.50. CEO Walter Goodrich purchased 10,900 shares for a price range of $22.49-$23.86. COO Robert Turnham also bought shares last month. And while the insider purchases caught my attention, there are other reasons to like this company.

The company reported 14% sequential growth and 40% annualized growth in average net production volumes to 46,500 Mcf per day for the third quarter. Cash flows climbed 71% from last year's levels to $19.2 million. However, Goodrich recorded a net loss of $23.7 million, or 0.94 cents per basic share, as compared to a net income of $6.7 million, or 27 cents per basic share, in the year-ago quarter. The company plunged to the black due to $14.8 million of non-cash adjustments to deferred tax asset.

In early December, the company offered an additional 5.8-million-share public offering, generating net proceeds of about $145.4 million. Goodrich plans to use most of the proceeds to repay debt. The company has been actively implementing cost controls, while increasing its production, which will likely boost earnings.

Analyst Ellen Hannan of Bear Stearns issued an outperform rating on the company, but reduced the price target to $34. Hannan said in a note to clients that "a continued ramp up in production volumes, coupled with declining costs, could support a higher price objective beyond year-end 2008."

It is interesting to note that Tygh Capital Management recently increased its holding of Goodrich. The firm looks for companies with superior earnings growth and sustainable valuations. This fund also owns Hologic (HOLX - commentary - Cramer's Take), Activision (ATVI - commentary - Cramer's Take) and Gamestop (GME - commentary - Cramer's Take).

Right now, Goodrich's shares are trading very close to their 52-week lows. But look at the plusses we've outlined. While insiders favor this stock, a smart fund has also raised its stake in the company. Also, the company's earnings should expand, with its focus on cost-cutting and increasing production. Although, GDP (gross-domestic-product) growth is likely to continue to decline, the stock of GDP may see upward movement in the next few months.

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At the time of publication, Raznick had no positions in the stocks mentioned, although positions may change at any time.

Jason Raznick is president of Easy Stock Alerts and has been involved with the capital markets for several years. He has worked for Merrill Lynch, Dynamis and Tricap Holdings, a joint venture with Fortress Investment Group. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Raznick appreciates your feedback; click here to send him an email.