Want Reliable Info on Energy Stocks? Try Insider Activity

There's no agreement on the near-term direction of energy prices, which now stand at just over $21 per barrel. Some pundits argue for a drop to the mid to low teens resulting from shrinking global demand due to recession. Others see a rise to $30 as OPEC controls its output and supply disruptions are deemed possible in the wake of the war on terrorism. Similar uncertainty surrounds the price of natural gas.

So with all these ifs and buts about the direction of oil prices, what information can give investors guidance in this industry? For our money, insider activity at energy firms has been a great indicator of the long-term direction of the industry's stocks.

We recall insiders buying heavily in 1998 as oil prices fell to $18 per barrel, then $15, then $10. The popular press sniggered loudly as insiders kept averaging down in their stocks throughout 1998. Stories in the mainstream deemed insiders "clueless" as they sat on losing positions in the beginning of 1999. ...