A lot of money is a relative thing. One thousand dollars is a lot for somebody who makes $20,000 a year. One million dollars isn’t as much to a person that makes $50 million. When you think of executives for publicly traded companies, the latter comes to mind, uber wealthy people making eight figures and up.
For many smaller companies, annual income with two commas isn’t always the case. When we see an insider with a modest salary, relative to the stereotype, invest more than 10% of their annual compensation, it catches our attention. It’s doubly more interesting when the insider has done nothing but sell previously. Extra emphasis is added when that person counts the money, i.e. the Chief Financial Officer (CFO).
That’s the trifecta we are playing this week. Barnwell Industries, Inc. (BRN) CFO Russell M. Gifford purchased 13,800 shares of the oil and gas company at $2.19 for an investment of $30,222. (1) That’s less than what some new cars cost today but represents 14% of his pay of $210,000 a year. (2) It’s also the first time Gifford has been a buyer. Previously, he sold six times, all in 2007, collecting more than $1.15 million. (1)
Barnwell operates three segments:
- Oil and Natural Gas: The company engages in oil and natural gas exploration, development, production, and sales in Canada.
- Land Investment: Barnwell invests in leasehold interests in real estate in Hawaii.
- Contract Drilling: BRN provides well drilling services and water pumping system installation and repairs in Hawaii.
Barnwell does not have any Wall Street coverage. As such, there aren’t any recommendations, price targets, or earnings and sales forecasts. Additionally, nearly 55% of the company’s shares are owned by insiders. (3) With only 8.28 million shares outstanding and a float (stock available for trading) of just 3.3 million shares, BRN’s price can swing aggressively on minimal volume.
The stock has moved sharply lower recently. Barnwell reached its 52-week high of $6.99 on January 28, 2021. It was a volatile day of trading as shares opened at $1.83, shot to the 52-week high and closed at $5.75. There wasn’t an accompanying news announcement, just $5.6 million shares of volume.
Barnwell’s price has dropped since that wild day. Perhaps, trading at the lowest price since February was the CFO’s motivation for buying? The last time BRN hit $2, the stock rebounded sharply and went as high as $4.34 in just two days.
The out of nowhere volume and huge price moves have the fingerprints of meme stocks. Meme stocks are defined as “stocks that see sudden and dramatic surges thanks to social media hype.” We can’t say for sure but it’s doubtful a CFO would buy his company stock in hopes of touts on Twitter. Maybe, Gifford sees value in his company trading at 1.16 times sales (P/S) when the industry average is 3 times revenue.
OVERVIEW: Without the benefit of analyst coverage, it’s difficult to guestimate what value Barnwell Industries, Inc. (BRN) offers potential investors, if any. Aside from trading at a discount to the overall industry on a P/S basis, Chief Financial Officer (CFO) Russell M. Gifford’s buy is the only clue as to what management believes could be on the horizon.
For now, BRN is only suitable for speculative investors with the greatest level of tolerance for volatility. Based on the company’s recent price activity, shareholders will have to absorb losses until the next wave of unexpected buying volume hits and there is no guarantee another surge will come.
1 – https://www.secform4.com/insider-trading/1305303.htm
2 – https://finance.yahoo.com/quote/BRN/profile?p=BRN
3 – https://finance.yahoo.com/quote/BRN/key-statistics?p=BRN