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When insiders accumulate a stock intensively, the stock can be expected to outperform the market during the next six months. Insiders tend to buy more often than usual before large price increases and to sell more than usual before price decreases.

In this article, I will feature one company that has seen intensive insider buying during the last 30 days. Intensive insider buying can be defined by the following three criteria:

  1. The stock is purchased by three or more insiders within one month.

  2. The stock is sold by no insiders in the month of intensive purchasing.

  3. At least two purchasers increase their holdings by more than 10%.

Armada Hoffler Properties (NYSE:AHH) is a full service real estate company with extensive experience developing, building, owning and managing high-quality, institutional-grade office, retail and multifamily properties in markets throughout the Mid-Atlantic United States. The company has elected to be taxed as a real estate investment trust (REIT) for U.S. federal income tax purposes.

(click to enlarge)

Insider buying by insider (last 30 days)

  • Russell Kirk purchased 27,219 shares on August 20-22 and currently holds 30,697 shares or 0.2% of the company. Russell Kirk serves as a director of the company.
  • Daniel Hoffler purchased 50,000 shares on August 20 and currently holds 54,348 shares or 0.3% of the company. Daniel Hoffler serves as Executive Chairman of the board of directors.
  • Louis Haddad purchased 50,000 shares on August 20 and currently holds 51,000 shares or 0.3% of the company. Louis Haddad is President and Chief Executive Officer.

Insider buying by calendar month

Here is a table of Armada Hoffler's insider-trading activity by calendar month.

MonthInsider buying / sharesInsider selling / shares
August 2013127,2190
July 201300
June 201300
May 201334,8270

There have been 162,046 shares purchased and there have been zero shares sold by the insiders since May 2013.

Financials

The company reported the pro forma second-quarter financial results on August 13 with the following highlights:

Revenue$37.5 million
Net income$8.4 million
Core FFO$6.5 million
Cash$14.7 million
Debt$244.3 million

Competition

Armada Hoffler Properties' competitors include Highwoods Properties (NYSE:HIW) and Washington Real Estate Investment Trust (NYSE:WRE). Here is a table comparing these companies.

CompanyAHHHIWWREIndustry Average (REIT - Diversified)
Market Cap:185.50M2.90B1.67B949.44M
Employees:N/A41528793.00
Qtrly Rev Growth (yoy):0.440.090.040.11
Revenue:129.38M545.01M309.38M121.32M
Gross Margin:0.340.640.660.72
EBITDA:34.51M282.23M186.35M82.75M
Operating Margin:0.170.270.270.47
Net Income:7.57M50.77M15.76MN/A
EPS:0.401.090.380.34
P/E:24.4431.4166.4823.08
PEG (5 yr expected):N/A3.151.372.34
P/S:1.435.325.406.70

Armada Hoffler is trading below the industry average P/S ratio, which could explain some of the insider buying. Highwoods Properties has seen 18 insider sell transactions this year and Washington Real Estate Investment Trust has seen six insider sell transactions this year.

Conclusion

There have been three different insiders buying Armada Hoffler and there have not been any insiders selling Armada Hoffler during the last 30 days. All three of these insiders increased their holdings by more than 10%. There are two analyst buy ratings, one neutral rating and zero sell ratings with an average target price of $12.00. Armada Hoffler is trading at a P/E ratio of 24.80 and a forward P/E ratio of 11.42. Armada Hoffler has a dividend yield of 6.61%. I have a cautiously bullish bias for the stock currently based on the insider buying.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Source: Insiders Are Buying Armada Hoffler Properties