Officers and directors of publicly-traded companies have two means of buying or selling their companies’ shares: on the open market, or via pre-arranged trading plans, which are known as 10b5-1 plans. A good deal of insider selling is now conducted under these 10b5-1 plans, which Insider Monkey avoids reporting, as past research shows that sales executed under pre-arranged trading plans are not informative about future stock performance, which isn’t surprising given their nature. When it comes to the usefulness of insider selling activity, one should bear in mind that corporate insiders usually sell shares for a wide array of reasons that might not be related to their companies’ future prospects. However, insider trading watchers should pay attention to clusters of insider selling, which may represent red flags that indicate that certain companies are approaching or exceeding their ‘true’ or ‘fair’ market value. With that in mind, the following article will discuss three companies with noteworthy insider selling, one of which registered a cluster of insider selling that is worth monitoring.
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).
Three Top-Tier Executives Offloaded Shares of This REIT
Let’s begin our discussion with the company that has witnessed a cluster of insider selling over the past two weeks, that being Medical Properties Trust Inc. (NYSE:MPW). This cluster of insider selling is quite notable given that three of the most influential insiders at the company unloaded sizable blocks of shares on the open market over the past two weeks. To start with, R. Steven Hamner, Executive Vice President and Chief Financial Officer, sold 155,000 shares on Monday at $13.18 apiece, trimming his overall holding to 1.02 million shares. Moreover, Emmett E. McLean, Executive Vice President and Chief Operating Officer, sold 50,000 units of common stock on Wednesday at a sale price of $13.27 per unit, which cut his ownership to 759,252 units. Last but not least, President and Chief Executive Officer Edward K. Aldag Jr. discarded 245,627 shares at the end of March at a weighted average price of $12.88. Following the not-so-distant sale, the CEO holds an ownership stake of 1.98 million shares.
Medical Properties Trust Inc. (NYSE:MPW) is a self-advised real estate investment trust (REIT) that focuses on acquiring, developing and leasing healthcare facilities across the United States and other international markets. The REIT’s facilities include 110 general acute care hospitals, 23 long-term acute care hospitals, 69 inpatient rehabilitation hospitals, and three medical office buildings. At the end of March, Medical Properties Trust announced an agreement with Brentwood-based hospital company RegionalCare Hospital Partners, under which MPT’s investment in the operations of Capella Healthcare Inc. will be merged with RegionalCare. This merger is set to create one of the largest healthcare operating companies in the United States, with MPT being expected to receive $550 million in net proceeds from the transaction. Soon after the announcement of this transaction, analysts at JMP Securities increased their price target on the REIT to $13 from $12.50 and reiterated their ‘Market Outperform’ rating on it, saying that the deal enhances the company’s current leverage. Medical Properties Trust said that the $550 million figure will be used to reduce its debt load, with the net debt figure anticipated to be 5.6-times pro-forma annualized EBITDA following this move.
MPT shares have gained 16% since the beginning of 2016 and currently change hands at around 13.1-times expected earnings, below the forward P/E multiple of 17.4 for the S&P 500 Index. The REIT also boasts an impressive dividend yield of 6.57%. There were nine hedge funds tracked by Insider Monkey with stakes in Medical Properties Trust Inc. (NYSE:MPW) at the end of 2015, with Amy Minella’s Cardinal Capital owning 3.63 million shares.