All major U.S. stock indexes closed in the green on Monday, after suffering significant losses following the Federal Reserve’s decision to raise interest rates. Although the Fed finally brought the much-awaited rate hike, many anticipate that the uncertainty around the pace of rate increases is not likely to fade away in the upcoming year. Meanwhile, some companies’ corporate insiders have been selling shares ahead of the two shortened trading weeks, which might suggest grim prospects at those companies in the forthcoming future. Investors should be careful when analyzing insider selling activity, as insiders usually sell shares for a wide range of reasons unrelated to their companies’ future prospects. The Insider Monkey team pinned down several noteworthy insider sales reported at three companies, so this article mainly discuses those trades and the performance of the three companies.
Prior to discussing the insider trading activity, let’s make you familiar with what Insider Monkey does. We track hedge funds and prominent investors because our research has shown that historically their stock picks delivered superior risk-adjusted returns. This is especially true in the small-cap space. The 50 most popular large-cap stocks among hedge funds had a monthly alpha of about 6 basis points per month between 1999 and 2012; however the 15 most popular small-cap stocks delivered a monthly alpha of 80 basis points during the same period. This means investors would have generated 10 percentage points of alpha per year simply by imitating hedge funds’ top 15 small-cap ideas. We have been tracking the performance of these stocks since the end of August 2012 in real time and these stocks beat the market by 53 percentage points (102% return vs. S&P 500’s 48.7% gain) over the last 38 months (see the details here).
Alexandria Real Estate Equities Inc. (NYSE:ARE) had two influential insiders sell shares last week. Founder, Chairman, and Chief Executive Officer Joel S. Marcus sold 4,000 shares on Thursday at a weighted average price of $90.91, trimming his holding to 596,316 shares. Chief Investment Officer Peter M. Moglia offloaded 5,000 shares last Tuesday at prices that ranged from $89.90-to-$89.97 per share. After the recent sell-off, the CIO holds 63,167 shares. The shares of this self-managed urban office REIT that mainly focuses on collaborative science and technology campuses are up nearly 3% this year. The REIT generated total revenue of $619.5 million for the first nine months of 2015, which denoted an increase of $81.3 million or 15.1% year-on-year. Alexandria Real Estate Equities Inc. (NYSE:ARE) has a leverage ratio of 39.5% as of September 30, which is substantially lower than the requirement of the key financial covenants under its unsecured senior line of credit and unsecured senior bank term loans. The management’s expertise in highly desirable locations for tenancy by science and technology entities is what differentiates this REIT from other companies in the industry. The number of smart money investors from our database with positions in the REIT climbed to 22 from 14 during the third quarter. Jeffrey Furber’s AEW Capital Management cut its stake in Alexandria Real Estate Equities Inc. (NYSE:ARE) by 8% during the July-to-September period, ending the quarter with 254,400 shares.