There aren’t so many things that can spur more anxiety among investors than witnessing their high-conviction stock picks register massive insider selling. Truth be told, if I had my hard-earned capital invested into a company’s stock, I would definitely be troubled by heavy insider selling at that company. However, insider selling activity may be sometimes wrongly interpreted by market participants, considering that directors and executives can cash out their holdings for a wide range of reasons that have nothing to do with their companies’ fundamentals or future prospects. Investors mostly focus on the fact that insiders sell shares, without attempting to figure out why those insiders might have sold shares in the first place. Of course, it is nearly impossible to find out the reason behind each insider sale, which is why insider trading watchers should be very careful when making conclusions based in insider selling activity. Insider Monkey processed dozens of Form 4 filings submitted with the SEC on Thursday and pinned down three companies with voluminous insider selling.
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 Had Executive Sell Massive Block of Shares Earlier This Week
Let’s begin our discussion by having a look at one insider sale registered at Crown Castle International Corp (NYSE:CCI). Philip M. Kelley, Senior Vice President – Corporate Development and Strategy, unloaded 46,951 shares on Wednesday at prices that fell between $87.16 and $87.94 per share, which cut his overall holding to 95,010 shares.
Crown Castle International represents a real estate investment trust that owns, operates and leases shared wireless infrastructure, including towers and rooftops, as well as small cell networks supported by fiber. At the end of December, CCI owned, leased and managed roughly 40,000 towers and 16,000 fiber miles across the United States. In the April of this year, the REIT acquired Tower Development Corporation in an all-cash deal valued at $461 million, after which it received possession of 336 towers in the U.S. and Puerto Rico. The REIT currently pays out a quarterly dividend of $0.885 per share, which equates to a currently dividend yield of 4.08%. Just recently, CCI’s Chief Executive Officer said the REIT is well-positioned to generate compound annual organic growth in adjusted funds from operations (AFFO) and dividends per share in the range of 6%-to-7% over the next several years, thanks to the innovation and adoption of wireless connectivity.
Crown Castle International, which buys and manages a portfolio of cell towers that are rented to carriers such as AT&T Inc. (NYSE:T), is seen as the ‘cleanest’ play on U.S. mobile infrastructure spending. Shares of CCI are nearly flat year-to-date, but they have gained 106% in the past five years. Charles Paquelet’s Skylands Capital cut its stake in Crown Castle International Corp (NYSE:CCI) by 5% during the March quarter to 626,750 shares.