In the world of triple-net REITs, most of the attention in the past week has been on the planned merger of American Capital Realty Properties (ARCP) and Cole Real Estate Investments (COLE). I recently wrote about ARCP, noting that the REIT had seen heavy insider buying over the summer — at prices higher than today’s. I also recommended the stock based on its growth prospects within a sector I love and its high dividend yield — 6.7% at today’s prices.
ARCP fell on the news on the COLE merger, which is typical for the acquiring firm (as a general rule, the acquirer falls and the acquired rises). But I continue to see value in REITs and ARCP in particular.
Today, however, I want to highlight other insider buying for REITs, namely, in a competitor of ARCP and COLE: Stag Industrial (STAG).
The scale of the insider buying of STAG is considerably smaller than that of ARCP. But its scope is every bit as wide, as six company officers have made purchases in the past quarter. As you can see from STAG’s insider trading history, the company’s officers have been steadily and consistently accumulating the shares over the past year.
Should you follow their lead?
Well, remember that company officers can sell for any number of reasons. But there is only one reason they buy: They consider their stock undervalued.
And with bond yields back to 2.5% and with quantitative easing promising to stay in place a little longer, STAG’s 5.5% dividend is attractive, if not spectacular. STAG is also a young, growing REIT with a small market cap of less than $1 billion and a clean balance sheet.
STAG is not likely to double in price in the next year or two, but in my view it would be a nice addition to a diversified income portfolio.
And given its size and pricing, I expect it to outperform most of its peers in the REIT sector.
Charles Lewis Sizemore, CFA, is the chief investment officer of the investment firm Sizemore Capital Management. Click here to receive his FREE 8-part investing series that will not only show you which sectors will soar but also which stocks will deliver the highest returns. The series starts November 5 and includes a FREE copy of his 2014 Macro Trend Profit Report.
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