A study (pdf) titled "Predictive and Statistical Properties of Insider Trading" by James H. Lorie and Victor Niederhoffer reached the following conclusion:
This study indicates that proper and prompt analysis of data on insider trading can be profitable, although almost all previously published studies have reached the contrary conclusion. 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.
Based on the findings of this encouraging insider trading study, I screened with Finviz for companies that have higher than 10% dividend yield and checked if the companies had any insider buys during the last 3 months. Here is a look at seven companies that I found:
1. American Capital Agency Corporation (NASDAQ:AGNC) is a mortgage REIT that invests in agency securities for which the principal and interest payments are guaranteed by
- a U.S. Government agency (such as the Government National Mortgage Association, or GNMA), or
- a U.S. Government-sponsored entity (such as the Federal National Mortgage Association, or FNMA, and the Federal Home Loan Mortgage Corporation, or FHLMC).
Gary Kain purchased 20,000 shares on August 7 and currently holds 338,864 shares of the company. Gary Kain has been the company's President since January 2009 and Chief Investment Officer since April 2011.
The company reported the second-quarter financial results on August 2 with the following highlights:
|Comprehensive income||$477 million|
|Quarterly dividend||$1.25 per share|
|Net book value||$29.41 per share|
The stock has a $43.5 price target from the Point and Figure chart. There has been one insider buy transaction and five insider sell transactions this year. The stock is trading at a forward P/E ratio of 8.26 and has a 13.7% dividend yield. The stock could be a good pick from the current level with a target price of $43.5.
2. ARMOUR Residential REIT (NYSE:ARR) is a Maryland corporation that invests primarily in hybrid adjustable rate, adjustable rate and fixed rate residential mortgage-backed securities [RMBS] issued or guaranteed by U.S. Government-chartered entities. ARMOUR is externally managed and advised by ARMOUR Residential Management [ARRM]. ARMOUR Residential REIT has elected to be taxed as a real estate investment trust [REIT] for U.S. federal income tax purposes.
Thomas Guba purchased 20,000 shares on September 6 and currently controls 199,683 shares of the company. Thomas Guba serves as a director of the company.
The company reported the second-quarter financial results on August 1 with the following highlights:
|GAAP loss||$13.6 million|
|Core income||$57.0 million|
|Book value||$7.04 per share|
ARMOUR Residential REIT announced on September 14 a Q4 2012 monthly cash dividend rate for the company's common stock of $0.09 per share.
There have been three insider buy transactions this year. There has not been any insider selling this year. The stock is trading at a forward P/E ratio of 6.61 and has a 14.3% dividend yield. The stock could be a good pick from the current level.
3. BGC Partners (NASDAQ:BGCP) is a leading global intermediary to the wholesale financial markets, specializing in the brokering of a broad range of financial products, including fixed income, rates, foreign exchange, equities, equity derivatives, credit derivatives, futures and structured product markets. BGC offers a full range of brokerage services, including price discovery, trade execution, straight through processing and clearing, settlement and access to electronic trading services through its eSpeed, BGC Trader and BGC Pro brands. Through its Newmark Grubb Knight Frank brand, the company offers commercial real estate tenants, owners, investors and developers a wide range of brokerage services, as well as property and facilities management.
The company reported the second-quarter financial results on July 26, with the following highlights:
|Pre-tax distributable earnings||$55.9 million|
|Net income [GAAP]||$3.9 million|
|Quarterly dividend||$0.17 per share|
|Book value||$2.24 per share|
The company is providing the following third-quarter 2012 outlook compared with third-quarter 2011 results:
- The company expects to generate distributable earnings revenue of between $415 million and $450 million, an increase of approximately 9 percent to 18 percent compared with $380.5 million. This guidance includes between $110 million and $125 million in revenue from Real Estate Services. Beginning with its financial results release for the third quarter of 2012, BGC will no longer provide a separate outlook by segment.
- BGC Partners expects pre-tax distributable earnings to be between approximately $41 million and $52 million versus $62.6 million.
- BGC Partners anticipates its effective tax rate for distributable earnings to be approximately 14.5 percent compared with 15.0 percent.
There have been two insider buy transactions this year. There has been only one insider sell transaction this year. The stock is trading at a forward P/E ratio of 7.60 and has a 13.36% dividend yield. The stock is still in a downward sloping channel. I would be looking to be a buyer if the stock can break out of the channel.
4. Ferrellgas Partners (NYSE:FGP), through its operating partnership, Ferrellgas, L.P., currently serves approximately one million customers in all 50 states, the District of Columbia and Puerto Rico. Ferrellgas employees indirectly own more than 21 million common units of the partnership through an employee stock ownership plan.
The company reported the fiscal third-quarter (ended April 30, 2012) financial results on June 8, with the following highlights:
|Net income||$20.6 million|
Ferrellgas Partners announced on August 23, the declaration of its fourth-quarter cash distribution of $0.50 per partnership common unit. The distribution marks the seventy-second consecutive $0.50 quarterly distribution and is payable September 14, 2012, to common unitholders of record as of September 7, 2012. The distribution covers the period from May 1, 2012 to July 31, 2012, the partnership's fourth quarter of fiscal 2012. Ferrellgas' annualized distribution is currently $2.00 per common unit.
President and Chief Executive Officer Steve Wambold commented on June 8:
While the past winter proved to be most challenging for the propane industry with temperatures the second warmest in recorded history, several encouraging signs appeared in the third quarter. Positive momentum is carrying over into the fourth quarter and we expect to report improved operating results in the quarters to follow.
Although the warm temperatures adversely affected retail propane sales, they did spark an early start to the grilling season. Our Blue Rhino tank exchange posted strong same-store sales gains with large retailers and across all trades.
Also contributing to the optimistic outlook are the continued progress of the company's cost-reduction program and the recent decline in wholesale propane costs.
We are increasingly confident that we will reach, if not exceed, our goal of more than $20 million in annualized cost savings by the end of fiscal 2013. And, propane costs are currently 53 % below year-ago levels.
The stock has a $34.5 price target from the Point and Figure chart. There have been 10 insider buy transactions this year. The latest insider sell transaction was in October 2010. The stock has a 10.17% dividend yield. I would be looking to be a buyer of this stock around $17 level.
5. The Gabelli Multimedia Trust (NYSE:GGT) is a closed-end, non-diversified management investment company whose investment objective is long-term growth of capital. The Fund seeks opportunities for long-term growth presented in the global telecommunications, media, publishing and entertainment industries. The Fund will also invest in companies participating in emerging technological advances in interactive services and products. Income is a secondary objective of the Multimedia Trust.
Salvatore Zizza purchased 701 Series B cumulative preferred shares on September 11-12 and 2,918 Series B cumulative preferred shares on August 29 - September 10. Salvatore Zizza currently holds 3,619 Series B cumulative preferred shares. Salvatore Zizza serves as a director of the company.
The company reported the second-quarter financial results on September 7, with the following highlights:
|NAV return||6.5% for six months|
|Quarterly dividend||$0.20 per share|
|Net Asset Value||$7.56 per share|
On August 16, the Board of Directors of The Gabelli Multimedia Trust reaffirmed its 10% distribution policy and declared a $0.20 per share cash distribution payable on September 21, 2012 to common stock shareholders of record on September 14, 2012.
The fund intends to pay a quarterly distribution of an amount determined each quarter by the Board of Directors. Under the fund's current distribution policy, the fund intends to pay a minimum annual distribution of 10% of the average net asset value of the fund within a calendar year or an amount sufficient to satisfy the minimum distribution requirements of the Internal Revenue Code, whichever is greater. The average net asset value of the fund is based on the average net asset values as of the last day of the four preceding calendar quarters during the year.
The stock has a $17.25 price target from the Point and Figure chart. There have been six insider buy transactions this year. The latest insider sell transaction was in April 2011. The stock has a 10.61% dividend yield. I would recommend buying the stock below the Net Asset Value ($7.56 per share).
6. Invesco Mortgage Capital (NYSE:IVR) is a real estate investment trust that acquires, finances and manages residential and commercial mortgage-backed securities and mortgage loans. The company's objective is to provide attractive risk-adjusted returns to its shareholders, primarily through dividends and secondarily through capital appreciation.
- John Day purchased 6,000 Series A (7.75%) cumulative redeemable preferred stock on August 21. John Day serves as a director of the company.
- Robson Kuster's wife purchased 1,133 shares on August 6, and 500 shares on May 18. Robson Kuster's wife currently owns 15,000 shares of the company. Mr. Kuster has served as the company's Chief Operating Officer since March 2011, and as Head of Research since July 2009.
- John Anzalone purchased 1,500 shares on May 17, and currently holds 23,107 shares of the company. Mr. Anzalone is Chief Investment Officer of the company. He is also a Senior Director and Head of Research & Trading, Mortgage-Backed Securities for the company's Manager and has over 20 years of fixed income investment experience.
- Richard King purchased 1,000 shares on May 16, and currently holds 37,545 shares of the company. Mr. King is the company's President and Chief Executive Officer. He is also the Head of Fixed Income Investments for the company's Manager.
The company reported the second-quarter financial results on August 1, with the following highlights:
|Net income||$79.8 million|
|Quarterly dividend||$0.65 per share|
|Book value||$18.40 per share|
On September 13, the Board of Directors of Invesco Mortgage Capital declared a cash dividend of $0.65 per share for the third quarter of 2012. The dividend will be paid on October 29, 2012 to shareholders of record on September 24, 2012, with an ex-dividend date of September 20, 2012.
The stock has a $30 price target from the Point and Figure chart. There has been steady insider buying since July 2009. There has not been any insider selling since at least July 2009. The stock is trading at a forward P/E ratio of 8.10 and has a 12.77% dividend yield. I would recommend buying the stock at the book value of $18.40 per share.
7. MCG Capital Corporation (NASDAQ:MCGC) is a solutions-focused commercial finance company providing capital and advisory services to middle-market companies throughout the United States.
Richard Neu purchased 31,345 shares on August 29, and 72,577 shares on August 28. Richard Neu currently holds 273,604 shares of the company. Mr. Neu has been Chairman of the Board since April 2009 and Chief Executive Officer of the company since October 2011.
The company reported the second-quarter financial results on July 31, with the following highlights:
|Net operating income||$5.6 million|
|Net loss||$7.0 million|
The company targets future annual base compensation and benefits levels of approximately $4.0 million to $5.0 million beginning in 2013. In addition, the company is lowering its projected embedded annual non-compensation cost structure to approximately $5.0 million to $6.0 million from the previous projection of approximately $5.5 million to $6.5 million.
The company expects to incur costs associated with its transition plan of approximately $0.10 per share to $0.15 per share, primarily attributable to severance costs and the related acceleration of restricted stock for terminated employees, the amendment and pay-off of SunTrust Warehouse financing facility and employee compensation, primarily in the form of retention and inducement payments.
During the three months ended June 30, 2012, the company incurred costs associated with its transition plan of $3.1 million or $0.04 per share, consisting of $0.8 million in accelerated deferred financing fees and other costs associated with the payoff of SunTrust Warehouse financing facility that the company recorded as interest expense, $0.3 million in retention and inducement payments that the company recorded as salaries and benefits, $0.2 million in amortization expenses associated with the elimination of positions that the company recorded as amortization of employee restricted stock awards, and $1.8 million in severance-related expenses that the company recorded as general and administrative expense. For the six months ended June 30, 2012, the company incurred $6.8 million, or $0.09 per share, of costs associated with its transition plan.
Given the accelerated level of monetizations and payoffs experienced through the first six months of 2012, together with the slower than anticipated pace of new originations, the company is currently carrying liquidity levels substantially higher than previously forecast. The company remains committed to making disciplined investments at appropriate risk-adjusted yields.
Absent a significant pickup in liquidity redeployment opportunities or an increase in leverage from a second SBIC license or other sources, the company would anticipate 2013 NOI levels of $0.45 to $0.55 per share, a reduction from the previous forecast of $0.50 to $0.60 per share.
The stock has a $7 price target from the Point and Figure chart. The company has a book value of $5.26 per share and a 10.61% dividend yield. The stock is currently trading at a forward P/E ratio of 11.48. The stock has seen three insider buy transactions and five insider sell transactions this year. I would recommend buying the shares at or below the book value of $5.26 per share.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in ARR, GGT, MCGC over 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.