Insider buying can be a useful tool in identifying stocks that may be ready to move. I typically don’t put much weight into analyst recommendations because they don’t have any skin in the game. But when CEOs and other executives – who know more about the company than you and I – put their money where their mouths are and make significant purchases, I listen.
And I’ve had my ear especially close to the ground over the past few weeks. Market chaos like what we’ve seen of late chums the water, turning insiders into frenzied buyers who think they can get a deal. I’m particularly excited because three high-yield stocks – doling out between 7% and 9% – have high-level managers using their own money to buy shares for their personal accounts.
Gaming and Leisure Properties (NASDAQ:GLPI)
Dividend Yield: 7.4%
Gaming and Leisure Properties (GLPI) is a relatively young REIT (real estate investment trust), spun off of Penn National Gaming (NASDAQ:PENN) in 2013, that owns properties leased out to gaming companies in “triple net” contracts.
However, while GLPI does share a little space near Vegas with the likes of MGM International (NYSE:MGM) and Las Vegas Sands (NYSE:LVS), this is a diversified “experience economy” play that includes brands such as Hollywood Casino, Ameristar and Boomtown in places such as Louisiana, Ohio, Mississippi and Illinois.
In February, CEO Peter Carlino and CFO William Clifford combined to snap up 125,000 shares of GLPI for over $4.1 million. They bought shares between $30 and $33. What’s interesting is that the pair bought following a slightly disappointing earnings report that saw revenues and net income both fall under GLPI’s own guidance – and sent the stock lower as a result. That’s a vote of confidence that they can achieve their 2018 guidance, which includes upticks in just about every metric, including the all-important funds from operations.
Kite Realty Group Trust (NYSE:KRG)
Dividend Yield: 7.9%
Kite Realty Group Trust (KRG) is a retail-focused REIT that specializes in neighborhood and community shopping centers, with interests in 117 operating and redevelopment properties. It also has two more under construction.
You won’t be surprised, then, to find out that KRG’s weakness isn’t wholly recent. Shares have been on the decline for the better part of two years, though the selling really has accelerated over the past three months – Kite Realty has shed nearly a quarter of its value over that time.
Four insiders have bought roughly 120,000 shares across the past couple weeks amid that weakness. What’s puzzling is, there’s not much recent news that would seem to inspire confidence. Bank of America) analyst Craig Schmidt downgraded KRG shares from “Buy” to “Neutral” amid a 2018 FFO forecast of $1.98 to $2.04 per share, the high end of which was shy of Schmidt’s forecast by 4 cents.
Schmidt lowered his price target, but only to $18 – well above current prices, implying the possibility that Kite has been oversold. Moreover, the fact that Kite raised its dividend despite its struggles could be management’s way of telegraphing that the company can navigate its way back to safety.
Compass Diversified Holdings (NYSE:CODI)
Dividend Yield: 8.8%
I last discussed Compass Diversified Holdings (CODI) about a year ago, and for those of you who aren’t familiar: This is an interesting one.
Compass was actually listed in a group of business development companies (BDCs) because it’s so similar to one, it actually goes to pains in its frequently asked question section to deny it. Instead, CODI’s business is buying controlling interests in companies, with an average target business of between $75 million and $500 million in enterprise value, with stable operating cash flows of at least $10 million a year.
At the moment, current holdings include Crosman, a maker of airguns, archery products and related accessories; Ergobaby, which designs baby-wearing products; and hemp-based foods maker Manitoba Harvest. Compass has been adding to its portfolio in 2018, too, buying Foam Fabricators, a maker of custom molded protective foam solutions, and announcing an add-on acquisition of Rimports, a home fragrance specialist, and
A batch of Compass insiders appeared to be chasing relatively low prices in the stock near the beginning of last month, snapping up 29,200 shares for about half a million dollars. Current prices are about a buck a share lower than where they bought, on average, which could indicate an even better value given insiders’ recent confidence.
Disclosure: Brett Owens and Michael Foster are contrarian income investors who look for undervalued stocks/funds across the U.S. markets. Learn how to profit from their strategies in the latest report, here.