Two REITs With Insider Buying

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As their share prices have gotten pummeled over the Bernanke “taper scare,” I’ve become increasingly bullish on REITs.  As I’ve written in recent weeks here on TraderPlanet, I believe this is an excellent time to accumulate shares of high-quality “buy and forget” triple-net equity REITs.  But I also think it’s an excellent time to take a position in their more speculative cousin, mortgage REITs. 

I’m not alone on this view.  The company insiders would appear to agree.
A company’s management and directors can sell their company’s stock for any number of reasons.  Perhaps they executed stock options or want to diversify their portfolio…or maybe their kids’ college tuition bill came due.  Unless the selling is widespread among several insiders, it’s hard to draw firm conclusions about insider selling. 

Insider buying is a very different story, however.  There is only one reason why a company insider would by their own stock on the open market: they consider it undervalued and consider it a good investment. 

Trading on material non-public information is illegal, of course.  But there is nothing illegal about a company director using their knowledge of the business and their feelings about its prospects to make an informed purchase.  And by following their SEC filings, we can do the same.

I’ll start with American Realty Capital Properties (ARCP), a triple-net retail REIT I hold in my Dividend Growth Portfolio.  In the month of August alone, six company officers bought nearly $3 million in stock between them.  Their average price?  $13.73.  At today’s prices, you can pick of ARCP’s shares for less than what the insiders paid and enjoy a solid 6.7% dividend yield.

Let’s also take a look at the recent insider trading activity at Annaly Capital (NLY), the largest and most popular mortgage REIT. Chairman and CEO Wellington Denahan-Norris spent $2 million of her own money buying shares in August.  Three other company officers made significant purchases in the month of August as well. 

The usual caveats apply here.  You should always do your own research and you should never blindly follow another investor—even a company insider.  But watching the trading moves of company insiders can provide useful insight when you’re contemplating a contrarian value trade.

Disclosures: Sizemore Capital is long ARCP.

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CharlesSizemore: RT @TraderPlanet: Friday's <Top Story> by @CharlesSizemore http://t.co/dhwHhBFjzn
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edjaworska1: Two REITs With Insider Buying http://t.co/ISZCxQheCq via @TraderPlanet
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edjaworska1: RT @TraderPlanet: Insider Buying: Learn How It Can Help You story by @CharlesSizemore http://t.co/dhwHhBFjzn
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CharlesSizemore: RT @TraderPlanet: Is It Time To Jump Into These REITS? Company Insiders Are Buying analysis by @CharlesSizemore http://t.co/dhwHhBFjzn
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Visitor - Steve: Fascinating. Thanks for showing the links to the insider buying. Very helpful. I'm going to take a close look at these REITs
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CharlesSizemore: Two REITs With Insider Buying http://t.co/K8bgFFZmZq $ARCP $NLY @TraderPlanet
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About the Author

Charles Lewis Sizemore, CFA, founder and editor of Macro Trend Investor (formerly The Sizemore Investment Letter), is dedicated to finding superior investments backed by powerful macro trends—before you hear about them on the nightly news or read about them in the newspaper or on the Internet. He has been a frequent guest on Bloomberg TV and Fox Business News, has been quoted in Barron’s Magazine, The Wall Street Journal,and The Washington Post and is a frequent contributor to Forbes Moneybuilder, GuruFocus, MarketWatch and InvestorPlace.com.

Charles is the co-author of Boom or Bust: Understanding and Profiting from a Changing Consumer Economy (iUniverse, 2008); and worked alongside best-selling financial author and economic strategist Harry S. Dent, Jr. in creating original research on the effects of changing global demographics on asset returns and economic growth. He also serves as the Chief Investment Officer of Sizemore Capital Management LLC,  a registered investment advisor.

His academic and real-life experience has given him a unique approach to investing: combining his insights into global macro trends with in-depth investor research. And he has developed a reputation for taking complex issues, recognizing long-term investment strategies, and then finding the hidden investing opportunities that he shares with investors.

Charles holds a master’s degree in Finance and Accounting from the London School of Economics in the United Kingdom and a Bachelor of Business Administration in Finance with an International Emphasis from Texas Christian University in Fort Worth, Texas, where he graduated Magna Cum Laude and as a Phi Beta Kappa scholar.

CharlesSizemore

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