The Insider Buying Continues In REITs

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Includes: NLY, STAG, VER
by: Charles Lewis Sizemore, CFA

I’ve been broadly bullish on REITs ever since the taper tantrum of May of last year, noting the heavy insider buying in several REITs I follow (see "Insider Buying Seen in STAG" and "Two REITs With Insider Buying").

Whenever you see a stock slide in value, there is always that nagging fear: "What does the market know that I don’t?" Often times the answer is nothing, and the selloff is due to macro factors not directly related to the company. That was certainly the case back in May; fears that Fed tapering would cause bond yields to rise caused the prices of "bond like" REITs to collapse.

One of the best indicators of whether a selloff is cause for concern is to see what company insiders are doing. You should not automatically follow what the insiders do, of course. Company management can be biased and as blind to outside macro risk as the next guy. But all else equal, I’d prefer to take the same side of the trade as the insiders. As imperfect as their knowledge is, it’s still going to be more comprehensive than yours. Remember, this is their day job.

So, what have the insiders been up to in STAG Industrial (STAG), American Capital Realty Properties (ARCP) and Annaly (NLY)?

In ARCP, insider buying has continued at a nice clip. Six different insiders have bought a combined 90,100 shares worth $1.2 million.

Likewise, the buying has continued in STAG. Eight different insiders have bought 7,044 shares worth $139,900 since December.

In Annaly, there have been no reported insider moves thus far in 2014, but four insiders bought 238,406 shares worth $2.5 million last November alone.

My advice? Continue to buy all three of these REITs on dips and reinvest your dividends. I see both equity and mortgage REITs as being ideal asset classes in 2014 as yields continue to ease off of their taper tantrum highs.

Disclosures: Long STAG and ARCP.

Disclaimer: This site is for informational purposes only and should not be considered specific investment advice or as a solicitation to buy or sell any securities. Sizemore Capital personnel and clients will often have an interest in the securities mentioned. There is risk in any investment in traded securities, and all Sizemore Capital investment strategies have the possibility of loss. Past performance is no guarantee of future results.