Insider trading – legal buys and sales completed by corporate insiders – represents an important aspect investors should consider when analyzing securities. Although it is generally known that corporate insiders buy shares of their companies for one simple reason – they believe Mr. Market undervalues those shares, insider trading watchers should still be very cautious when deciding on whether an insider purchase is informative or not.
It is true that insider purchases tend to beat broader market benchmarks on aggregate, but the key word here is “aggregate.” Hence, I would like to lay out three important tips that can enable investors to identify informative insider purchases. First, investors should look for clusters of insider buying, which usually imply that there is a consensus among insiders that their companies’ shares are undervalued. Second, investors should avoid insider transactions conducted under pre-arranged trading plans, as recent research shows that spur-of-the-moment insider purchases generate higher returns than those conducted under trading plans. Third, investors should attempt to find purchases conducted by long-time insiders who purchase shares for the first time. There must be a strong reason why those insiders decide to initiate stakes after serving for their companies after a few years. With that in mind, let’s have a look at a set of noteworthy insider purchases and sales reported with the SEC on Thursday.
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Insider at Transforming REIT Buys Shares after Spin-off Announcement
One member of Vornado Realty Trust (NYSE:VNO)’s Board of Trustees acquired a relatively sizeable block of shares this week. Director Daniel R. Tisch acquired a new stake of 50,000 shares on Wednesday at prices ranging from $87.96 to $88.92 per share, a stake held by the Damial Foundation Inc. – a charitable foundation over which Mr. Tisch holds sole voting and investment power. Mr. Tisch also holds a direct ownership stake of 5,000 shares.
In late October, landlord Vornado Realty Trust (NYSE:VNO)’s Board of Trustees approved the tax-free spin-off of its portfolio of Washington, D.C. office buildings and apartments into a new company that would be merged with the business and certain select assets of real estate company, called the JBG Companies. The deal is set to create a landlord with a significant presence in the Washington area, aggregating around 11.8 million square feet of office space and more than 4,400 apartments. According to the man in charge of Vornado Realty Trust, the planned spin-off of the company’s D.C. portfolio represents a “no-brainer” that will allow his real estate investment trust to retain an interest in D.C.’s office market without committing a great deal of attention on this market. The shares of the REIT are 13% in the red year-to-date. LMR Partners, founded by Ben Levine, Andrew Manuel and Stefan Renold, added a 14,324-share stake in Vornado Realty Trust (NYSE:VNO) to its portfolio during the third quarter.
The final page of this article discusses more insider transactions reported with the SEC on Thursday.