(By Rich Bieglmeier) Monitoring the purchases of stock by insiders is a good way for investors to find companies they might not have heard about otherwise. Many times, Executives tip their hands on how they feel about their company's fortunes. iStock pay closer attention to buys than sells because CEOs, CFOs, directors… need money to buy those mansions and yachts.
But, we think nobody lies with their wallet, and that most insiders buy the stock they are most knowledgeable and intimate with for one reason – to make money. The same reason you buy stocks.
Typically, we look for cluster buys where multiple members of the executive staff buy the stock simultaneously, or large buys that close in on seven figures. Would you throw a million dollars away if you knew your company was headed for a hand-basket trip?
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Once we have identified a stock of interest, iStock examines the track record of the insider(s). Like any other stock picker, money-manager, handicapper… we want to make sure they have a history of getting it right.
So, when we saw two insiders, each buying more than $1 million of Newcastle Investment Corp. (NCT), we got a little excited. On February 15th, Director, Wesley Edens and Secretary, Randal Nardone each purchased 95,500 shares at $10.48 for $1,000,840 each. Two buys are better than one!
Now, remember, we said our second criterion is track record. In January 2013, the same duo bought nearly $1 million each at $9.35 a share. In July 2012, the pair picked up more than $3 million ($2:1 Edens:Nardone) at $6.70 per share. And, way back in September 2011, our dynamic duo splurged on $4.5 million ($3.5:1 Edens:Nardone) of NCT at $4.55 per share. By now, you'd expect to see some profit taking, no?
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In addition to substantial capital gains, Newcastle pays shareholders a fat dividend of 88 cents a year or 7.9%. Not only have Edens and Nardone outperformed most, if not all, money-managers, the dividend crushes bank CD rates. (Of course, your money is safer in a Too Big to Fail Bank CD ;)
Newcastle operates as a real estate investment and finance company that invests in real estate securities including commercial mortgage backed securities, senior unsecured debt issued by property REITs, real estate related asset backed securities, and agency residential mortgage backed securities.
Overall: Edens' and Nardone's track records plus the attractive dividend makes Newcastle Investment Corp. (NCT) an intriguing candidate for investors seeking a total return REIT.