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Newcastle Investment Corp. (NCT) Insider Buying With 9% Yield And Potential Upside

 January 14, 2013 03:00 PM

(By Rich Bieglmeier) Last week had to be one of the lightest weeks of insider buying that we have seen in a long time. Usually, iStock has a number of cluster buys or large insider purchases to choose from, not so much this week.  There were only 11 purchases of more than a million dollars, but none from executive management i.e. CEO, CFO, VPs…

At the same time, there was only one cluster buy and one large purchase that we would consider noteworthy. There was a handful more where a number of insiders bought odd lots, but for chump change.

Only Newcastle Investment Corp. (NCT) and Exa Corporation (EXA) warranted more attention in our view. Although the two officers bought EXA, it trades less than 50,000 shares a day; so, we will focus on NCT's big buy.

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Newcastle's Chief Operating Officer, Randal Alan Nardone almost made the million dollar list picking up $999,982 of the Real Estate Investment Trust (REIT). The company's portfolio of real estate securities includes commercial mortgage backed securities, senior unsecured debt issued by property REITs, real estate related asset backed securities, and agency residential mortgage backed securities. Newcastle also owns interest in loans and pools of loans, including real estate related loans, commercial mortgage loans, residential mortgage loans, and manufactured housing loans. In addition, it owns interests in operating real estate.

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As regular readers of our weekly insiders columns know, one of the things we like to do is examine the track record of previous buys. We want to know if insiders are leading indicators. In the case, Nardone did join the million dollar club in July at $6.70 per share and missed by a dollar in September 2011 at $4.55 per share. You see above what NCT trades at today. Needless to say, but we will anyway, the COO has been an excellent leading indicator for the future price of his company's stock price. iStock also finds Nardone's buy informative as his recent buy at $9.35 is super close to the 52-week high of $9.97.

In total, the insiders combined purchases of nearly $3 million worth of the REIT will return nearly $270,000 in dividend income per year based on NCT's current yield of 9%. Bet you can't find that at the local or too big to fail bank. As long as the FED has its ZERO interest rate policy in effect, you won't see it anything near it anytime soon.

Based on our view of Newcastle's stock chart, the stock could settle back in the intermediate term. However, if Nardone goes four-for-four, the next level of resistance is close to $14, and in line with his previous Newcastle Investment Corp. (NCT) payoffs.


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