Two REITs And One Casino Operator Witness Heavy Insider Selling

Many anticipate that the key factors that dragged down U.S. equities throughout 2015 will continue to put weight on major stock indexes in 2016 as well. Most analysts believe that the low commodity price environment will stick around in 2016, while the global economic growth is not expected to pick up next year. Even more to that, U.S. corporate profits are also expected to decline next year, primarily as a result of the weakening global demand and the strong dollar. Although the buck has slightly weakened against the Euro lately, many believe that the monetary policy divergence (pursued by the Fed and the ECB) will most likely result in a stronger US dollar. In the meantime, some companies’ insiders have been cashing out their holdings, which could scare away investors to some extent. The Insider Monkey team identified several noteworthy insider sales reported at three US-listed companies ahead of Christmas, so this article discusses both the insider selling reported at those companies and their recent performance.

Prior to discussing the insider trading activity, let’s make you familiar with what Insider Monkey does. At Insider Monkey, we track hedge funds’ moves in order to identify actionable patterns and profit from them. Our research has shown that hedge funds’ large-cap stock picks historically underperformed the S&P 500 Total Return Index by an average of seven basis points per month between 1999 and 2012. On the other hand, the 15 most popular small-cap stocks among hedge funds outperformed the S&P 500 Index by an average of 95 basis points per month (read the details here). Since the official launch of our small-cap strategy in August 2012, it has performed just as predicted, returning over 102% and beating the market by more than 53 percentage points. We believe the data is clear: investors will be better off by focusing on small-cap stocks utilizing hedge fund expertise (while avoiding their high fees at the same time) rather than large-cap stocks.

SL Green Realty Corp (NYSE:SLG) had one of its most influential insiders sell big this past week. Chief Executive Officer Marc Holliday reported selling 145,000 shares last week at prices that ranged from $109.50 to $111.16 per share, 72,752 shares of which were held through Holliday Family Investments LLC. This comes after 83,248 long-term incentive plan (LTIP) units owned by Marc Holliday in SL Green Operating Partnership L.P., of which SL Green Realty is the sole general partner, were converted into an equal number of SLG shares. After the recent sell-off, Holliday Family Investments owns no shares in the company, while the CEO holds a direct ownership stake of 35,616 shares. The shares of this self-managed real estate investment trust (REIT) have lost 5% so far in 2015. SL Green Realty Corp (NYSE:SLG) reported rental revenues of $926 million for the nine months that ended September 30, up from $826.8 million reported a year ago. The 12% year-over-year rental revenue growth was mainly achieved due to the properties acquired in 2014 and 2015, and an increase in occupancy. The occupancy in the REIT’s same-store consolidated office operating properties reached 93.7% on September 30, as compared with 91.7% registered exactly a year ago. John Khoury’s Long Pond Capital acquired a 577,400-share stake in SL Green Realty Corp (NYSE:SLG) during the third quarter.

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The second page of this insider trading article reveals the insider sales reported at Duke Realty Corp (NYSE:DRE) and Century Casinos Inc. (NASDAQ:CNTY).

Duke Realty Corp (NYSE:DRE) also saw one of its top executives sell shares last week. Chairman and Chief Executive Officer Dennis D. Oklak unloaded 14,225 shares last Monday and 24,700 shares on Tuesday at a weighted average price of $21.03, trimming his overall holding to 318,534 shares. This REIT owns and operates a portfolio of industrial, medical office and office properties, but also offers real estate services. Its shares are nearly 4% in the green year-to-date despite suffering several major pullbacks this year. It appears that the rising interest rate environment is not likely to have a significant impact on the company’s interest rate payments, as the REIT has been primarily borrowing at fixed rates in order to diminish the impact of interest rate fluctuations. The REIT reported revenues of $727.87 million for the first nine months of 2015, down from $800.57 million reported a year ago. Nonetheless, its diluted net income per share increased to $1.70 from $0.62 reported for the nine-month period ended September 30, 2014. Meanwhile, the REIT’s overall occupancy rate reached 96.3% on September 30, up from 95.3% registered a year ago. The number of smart money investors with positions in Duke Realty Corp (NYSE:DRE) dropped to 12 from 16 during the third quarter, while Israel Englander’s Millennium Management cut its stake in the company by 10% during the quarter to roughly 783,000 shares.

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Last but not least, we will look into the insider selling activity at Century Casinos Inc. (NASDAQ:CNTY). Chairman and Co-CEO Erwin Et Al Haitzmann sold out his entire stake of 13,650 shares on Wednesday at prices in the range of $7.10 to $7.16 per share. The executive also holds an indirect ownership stake of 1.35 million shares. The shares of this international casino entertainment company have advanced 38% since the beginning of the year, which could somewhat explain the CEO’s decision to cash out. Even so, the stock still trades at a cheap trailing price-to-earnings ratio of 15.51, which is substantially lower than the average of 22.95 for the companies included in the S&P 500 benchmark. The company generated total operating revenue of $101.80 million for the nine-month period that ended September 30, as compared to $88.79 million reported a year ago. Most importantly, its net earnings increased to $11.17 million from $1.46 million reported for the first nine months of 2014. At the same time, analysts anticipate earnings per share growth of nearly 10% next year, which yields a forward P/E ratio of only 11.20 (the forward P/E ratio for the S&P 500 stands at 17.47). A number of eight hedge funds from our database had stakes in the company at the end of the third quarter, amassing 22% of its outstanding shares. John W. Rogers’ Ariel Investments reported owning 3.45 million shares of Century Casinos Inc. (NASDAQ:CNTY) through the latest round of 13Fs.

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Disclosure: None