With U.S. equities collectively ending the first quarter of 2016 in positive territory despite experiencing a massive sell-off at the beginning of the year, the insider selling activity has been gaining steam in the past several weeks. Fresh statistics display that last week’s dollar volume of insider buying declined as compared to the volume registered in the prior week, whereas the volume of insider selling more than doubled week-over-week. Stock market watches should anticipate weakening insider trading activity in the weeks ahead, as most companies enter their trading blackout periods ahead of the first-quarter earnings season, which restrict corporate insiders from buying or selling equities. As insider selling activity have been gaining pace in the past several weeks, some insider trading watchers might find it interesting to take a glance at the most noteworthy insider selling that occurred last week. Insider Monkey examined numerous Form 4 filings submitted with the U.S. SEC on Friday and pinpointed several notable insider sales registered at three companies.
Through extensive research, we have determined that the due diligence that the investors in our database employ, as well as their long-term focus makes them perfect targets to emulate. However, the results of our analysis have also shown that the small-cap picks of these funds can generate much better returns, with the 15 most popular small-cap stocks beating the market by an average of 95 basis points per month (read more details here).
To start with, Churchill Downs Inc. (NASDAQ:CHDN) had one corporate insider unload a sizable block of shares past week. Non-executive Chairman Robert L. Evans, who stepped down from his role as Executive Chairman in 2015, sold 15,000 shares on Tuesday at a weighted average sale price of $145.55, trimming his overall holding to 165,628 shares.
Churchill Downs Inc. (NASDAQ:CHDN) serves as a diversified racing, gaming, and online entertainment company anchored by the widely-known horse race called The Kentucky Derby. To be more detailed, the company conducts its operations through six operating segments: Racing, Casinos, TwinSpires, Big Fish Games, Other Investments and Corporate. The company’s 2015 total net revenue reached $1.21 billion, increasing from $812.22 million in 2014 and $779.03 million in 2013. The $400.1 million net revenue increase was mainly driven by the acquisition of Big Fish Games Inc., a producer and distributor of social casino, casual and mid-core games, in December 2014. The transaction involved an upfront purchase price of $485 million in cash and stock, with an additional payment of up to $350 million that may be paid based on 2015 earnings growth. The Big Fish Games acquisition upped the company’s 2015 top-line figure by $399.8 million. Meanwhile, net income totaled $65.20 million for 2015, up from $46.36 million in 2014 and $54.90 million in 2013. Shares of Churchill Downs have advanced 262% in the past five years, after having gained 28% in the past year alone. Therefore, the recent insider selling at the company should not come as a surprise for shareholders and other stock market watchers. The stock is priced around 19.0-times expected earnings, versus the forward P/E multiple of 26.3 for the Casinos and Gaming industry and the ratio of 17.5 for the S&P 500 benchmark. The hedge fund sentiment towards Churchill Downs declined during the December quarter, with the number of funds invested in the company dropping to 22 from 26 quarter-on-quarter. Those 22 funds amassed roughly 34% of the company’s outstanding common stock at the end of December 2015. Matthew Sidman’s Three Bays Capital upped the stake in Churchill Downs Inc. (NASDAQ:CHDN) by 19% in the fourth quarter of 2015, ending the year with 1.37 million shares.
Let’s now examine the insider selling activity observed at Medical Properties Trust Inc. (NYSE:MPW). Edward K. Aldag, President, Chief Executive Officer and Co-founder of Medical Properties Trust, discarded 120,805 shares on Wednesday and 124,822 shares on Thursday at a weighted average price of $12.88. After the recent sales, Mr. Aldag continues to hold a direct ownership stake of 1.98 million shares.
Medical Properties Trust activates as a self-advised real estate investment trust (REIT) that focuses on owning net-leased healthcare facilities in the United States and other foreign countries. The REIT’s portfolio comprises 110 general acute care hospitals, 23 long-term acute care hospital, 69 inpatient rehabilitation hospitals, as well as three medical office buildings. It should be noted that the REIT has investments in Germany, the United Kingdom, Italy and Spain through two joint ventures formed in 2015. Fresh data from the Centers for Medicare and Medicaid Services (CMS) displays that national health expenditures are expected to grow 5.3% in 2016, and the average compound annual growth rate for national health expenditures will reach 5.8% over the period of 2016 through 2024. Medical Properties Trust generated total revenue of $441.88 million in 2015, which increased from $312.53 million in 2014 and $242.52 million in 2013. The REIT’s 2015 normalized funds from operations were $274.81 million, as compared to $181.74 million in 2014 and $147.24 million in 2013. It should be noted that the company invested or committed to invest roughly $1.8 million in healthcare real estate assets last year, so Medical Properties Trust is indeed seeking to capitalize on the aforementioned trends in the healthcare industry. The REIT currently pays out an annualized cash dividend of $0.88 per share, which equates to a dividend yield of 6.84%. The shares of the healthcare-focused REIT are nearly 12% in the green year-to-date. A total of nine money managers from our system had long positions in the REIT at the end of December 2015. Ken Griffin’s Citadel Advisors LLC trimmed its position in Medical Properties Trust Inc. (NYSE:MPW) by 35% in the fourth quarter of 2015, ending the year with 400,509 shares.
Realty Income Corp (NYSE:O) is another REIT that saw noteworthy insider trading activity on the sell side last week. To begin with, Michael R. Pfeiffer, Executive Vice President, General Counsel and Secretary, sold 2,727 shares on Wednesday for $62.52 each, as well as offered 180 shares as a gift (no consideration was received). After the recent transactions, Mr. Pfeiffer currently owns 38,966 shares along with an additional 6,697 restricted stock units. Moreover, Chief Executive Officer John P. Case filed a Form 4 filing on Friday to disclose the sale of 15,000 shares on Wednesday and 8,000 shares on Thursday at a weighted average sale price of $62.53. The CEO continues to own 180,401 units of common stock.
Realty Income Corporation, also known as “the Monthly Dividend Company”, operates as a real estate company with the primary business purpose of generating monthly cash dividends by owning and managing a diversified commercial property portfolio consisting of 4,548 properties. A total of 4,467 properties were leased at the end of December 2015, which equates to an occupancy rate of 98.4%. Although Realty Income is perceived to be a very popular stock among retail investors, a mere 11 hedge funds from our system were invested in the REIT at the end of 2015. Realty Income’s shares have advanced 23% in the past 12 months and 54% in the past two years, which have pushed its current dividend yield to 3.84%. This represents one of the lowest dividend yields in the net-lease REIT space. Realty Income’s funds from operations grew by $89.5 million, or 15.9%, in 2015 to $652.4 million. Despite the sustained growth in FFO metrics, it is believed that Realty Income is slightly overvalued at the moment relative to other industry peers. For instance, W.P. Carey Inc. REIT (NYSE:WPC), another fast-growing REIT in the commercial industry, offers an annualized dividend yield of 6.31%. Nonetheless, it is also worth mentioning that Realty Income is on track to join the list of Dividend Aristocrats (a select basket of companies that have increased annual dividend payments for at least 25 consecutive years) should it keep growing its annual dividend payments through 2019. Adage Capital Management, founded by Phill Gross and Robert Atchinson, reported owning 386,200 shares of Realty Income Corp (NYSE:O) through its 13F for the December quarter.