Arbor Realty Trust, Inc. (ABR) is a real estate finance company that invests in bridge and mezzanine loans. It has just reinstated its dividend, and pays $.075 per quarter. Forbes recently reported huge insider buying of the company. A list of the purchases are below:
|03/06/2012||Melvin F. Lazar||Director||25,000||$4.99||$124,692.50|
|03/08/2012||Melvin F. Lazar||Director||23,500||$5.24||$123,180.10|
|03/19/2012||Ivan Kaufman||COB, CEO and President||20,000||$5.37||$107,355.03|
|03/15/2012||Melvin F. Lazar||Director||1,500||$5.38||$8,065.05|
|06/14/2012||Ivan Kaufman||COB, CEO and President||25,000||$5.25||$131,175.00|
It is presently possible to buy the stock at the same price those insiders purchased their stock. It was listed at $5.20 per share on 7/12/12. If you purchase shares at this price, you will be buying the stock at $2.00 under book value.
The company has gone through some very difficult times over the past several years with high loan losses. It has adjusted its capital position over the past year, which has resulted in a $4.00 loss of book value. The company has positioned itself to move forward and become profitable once again.
Reasons to buy this stock are:
- Reasonable dividend payments of over 5%.
- Huge insider buying indicating promising developments within the company.
- Buying the stock at the same price as insiders.
- Buying an ongoing business below book value of the assets.
Reasons to be cautious about this stock are:
- Several past years with no dividends.
- Several past years with huge losses on loans and finances.
- Huge leverage of the company's books.
This stock represents a good short-term investment. It offers a good dividend with a better than 50/50 chance that it will rise over the next year or two. As investors recognize this turnaround, the price of the stock will grow accordingly. However, exercise caution because when insiders begin to sell in large numbers and/or long-term interest rates rise above 6%, recognize these sell signals and get out.
Disclosure: I am long ABR.