Peter Lynch, an investment guru who managed to generate returns of 29% per annum during his 13 years at the helm of Fidelity Magellan, once said that “Insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise”. But one question still remains unanswered: are insiders’ purchases on the open market outperforming broader market benchmarks? The simple fact that insiders believe the share price of a stock will rise does not necessarily mean that the stock will actually appreciate over time. However, much research suggests that officers and directors are experts at trading their companies’ securities, with their purchases beating benchmarks by a wide margin. Recent academic research also shows that they are skilled at trading other stocks in their industry, which shows both how vast and valuable their industry knowledge and experience is. With that in mind, Insider Monkey examined dozens of Form 4 filings submitted with the SEC on Monday and pinned down three companies with the most noteworthy insider purchases.
Academic research has shown that certain insider purchases historically outperformed the market by an average of seven percentage points per year. This effect is more pronounced in small-cap stocks. Another exception is the small-cap stock picks of hedge funds. Our research has shown that imitating the 15 most popular small-cap stocks among hedge funds outperformed the market by nearly a percentage point per month between 1999 and 2012 (read more details here).
This REIT’s CEO Keeps Buying Shares
Ryman Hospitality Properties Inc. (REIT) (NYSE:RHP) is one of the three companies with notable insider buying amid relatively weak insider trading activity of late, though it has started to gain steam over the past several trading sessions. Chairman and Chief Executive Officer Colin V. Reed bought 7,400 shares on Friday for $52.53 each. Mr. Reed owns a direct ownership stake of 1.02 million shares, which includes 525,912 shares credited to his supplemental executive retirement plan (SERP) account. Each of the latter group of shares has the economic equivalent of one share and are payable exclusively in shares of common stock following termination of employment.
Ryman Hospitality Properties Inc. (REIT) (NYSE:RHP) operates as a real estate investment trust (REIT) whose owned assets include four upscale, meetings-focused resorts with 7,795 rooms managed by lodging operator Marriott International Inc. (NASDAQ:MAR) under the Gaylord Hotels brand. The REIT’s total revenue for 2015 reached $1.09 billion, up from $1.04 billion in 2014. The increase was mainly driven by an increase of $40.4 million in revenue from the Hospitality segment, as well as an increase of $10.7 million in revenue generated by the Entertainment segment. It should be noted as well that the REIT’s total revenue per available room (Total RevPAR) increased to $303.45 in 2015 from $296.09 in 2014 and $267.24 in 2013.
Shares of Ryman Hospitality Properties are up by nearly 1% year-to-date, after gaining 19% in the past three months. The REIT intends to pay out an annual dividend of $3.00 per share in 2016, which implies an attractive dividend yield of 5.75%. There were 17 hedge fund vehicles tracked by Insider Monkey with stakes in the REIT at the end of 2015, which amassed approximately 17% of the company’s outstanding common stock. Bernard Selz’s Selz Capital reported owning 257,400 shares of Ryman Hospitality Properties Inc. (REIT) (NYSE:RHP) as of March 31.
Let’s head to the next two pages of this daily insider trading article, where we will discuss the Form 4 filings submitted by insiders at Porter Bancorp Inc. (NASDAQ:PBIB) and Monsanto Company (NYSE:MON).