Voluminous insider buying is generally interpreted as a bullish signal by the investment community, as there appears to be only one reason corporate insiders would buy shares in their own companies. Unlike many indicators based on historical data, insider buying usually serves as a forward-looking indicator. Most of the time, insider purchases reveal that corporate insiders believe their company’s stock is worth more than the price tag set by the invisible hand of Mr. Market and they tend to be quite accurate in those beliefs.
Past research, analysts, and insider trading experts suggest that clusters of insider buying are significantly more informative than single buys. This means that a herd of insiders buying shares is a much better signal than a ‘lone wolf’ buying shares, who may be wrong at times. As Dr. Inan Dogan, the founder of Insider Monkey and a well-known researcher in the field of insider trading said in an interview held a little while ago: “One insider might overestimate a company’s prospects, but there is higher certainty when many insiders are buying.” With that in mind, the following article will reveal a cluster of insider buying recently observed at one company, as well as discuss other notable insider transactions reported with the SEC on Wednesday.
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Cluster of Insider Buying at Mortgage REIT Before Year-End
Let’s begin our discussion with the cluster of insider buying witnessed at ARMOUR Residential REIT Inc. (NYSE:ARR), where three high-ranking executives bought shares earlier this week. Chief Financial Officer James R. Mountain bought 2,000 shares on Wednesday at a price tag of $21.67 per share, lifting his overall holding to 12,998 shares. Jeffrey J. Zimmer, the Co-Chief Executive Officer, Co-Vice Chairman and President of ARMOUR since November 2009, purchased 8,000 units of common stock on the same day for $21.67 each. After the purchase, Mr. Zimmer currently owns an aggregate of 84,126 units of common stock. Last but not least, Scott J. Ulm, Co-Chief Executive Officer, Co-Vice Chairman, Chief Investment Officer, and Head of Risk Management, snatched up 7,000 shares on Wednesday at $21.54 apiece. The purchase lifted Mr. Ulm’s ownership to 79,426 shares.
The shares of ARMOUR Residential REIT Inc. (NYSE:ARR), which invests in residential mortgage backed securities and mortgage loans in the United States, are down by a little less than 1% thus far in 2016. Most investors may be reluctant to touch any mortgage-backed securities after the financial crisis of 2008, as these derivatives represented the culprit of the sub-prime mortgage collapse. Nonetheless, ARMOUR’s portfolio predominantly consists of mortgage-backed securities backed by quasi-government agencies such as Fannie Mae or Freddie Mac, so a possible investment in the REIT does not seem overly risky. In early-November, the REIT announced a cash dividend of $0.22 for December, which equates to an annual dividend yield of 12.2%. Andy Redleaf’s Whitebox Advisors had around 820,000 shares of ARMOUR Residential REIT Inc. (NYSE:ARR) in its portfolio at the end of the third quarter.
The next two pages of this insider trading article will discuss the fresh insider buying and selling at four other companies.