In a fresh study on insider trading, several researchers from the Harvard Business School developed a framework for classifying trades by corporate insiders as either “routine” or “opportunistic” based on a certain set of attributes. One important conclusion that can be reached by examining the HBS study is that by ignoring the pool of “routine” insider transactions, one can retain a cluster of information-rich trades that contain predictive power for the future of firms.
But how can one differentiate between “routine” and “opportunistic” insider transactions? Through initial ownership, stock grants, and other market transactions, corporate insiders’ holdings of company stock usually comprise a high portion of their entire wealth. As a result, personal liquidity or diversification needs are usually affecting the timing of their insider transactions, which makes it extremely difficult for outsiders to interpret whether a specific transaction is informative or not. By stripping away insider transactions conducted under pre-arranged trading plans or transactions related to stock options, the odds of stumbling upon “routine” insider trades lowers to a great extent. Leaving this discussion aside, let’s have a closer look at a pool of noteworthy insider transactions reported with the U.S. SEC on Tuesday.
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Two Insiders at Transitioning REIT Purchase Shares
Two different insiders at Investors Real Estate Trust (NYSE:IRET) purchased shares of company stock earlier this week. To begin with, Mark O. Decker Jr., President and Chief Investment Officer, snatched up 45,900 shares on Tuesday at a price tag of $5.87 each, boosting his overall ownership to 89,449 shares. Linda J. Hall Keller, independent member of the company’s Trustees Board, filed Tuesday to disclose the purchase of 5,000 shares for $5.89 each. After the recent purchase, Ms. Hall currently holds an ownership stake of 34,907 shares.
The insider buying comes after the equity real estate investment trust that owns and operates multifamily, healthcare and other properties located mainly in the upper Midwest states of Minnesota and North Dakota has seen the value of its shares plunge by 13% in the past five trading sessions. The plunge was triggered by the release of Investors Real Estate Trust (NYSE:IRET)’s financial and operating results for the quarter that ended July 31. The REIT’s recently-announced pending sale of 26 senior housing assets for $236 million represents an exit from this line of business, a move that is part of the company’s strategy to transform into a pure-play multifamily REIT. IRET’s shares are 17% in the red thus far in 2016. Jim Simons’ Renaissance Technologies LLC was the owner of around 2.12 million shares of Investors Real Estate Trust (NYSE:IRET) at the end of June.
The next two pages of this article will discuss another set of notable insider transactions reported on Tuesday.