(By Rich Bieglmeier) Insider cluster buys are usually a telltale sign that executive team members and directors believe their company's stock is going higher. After all, CEOs, CFOs, and directors are trading on "insider information," know industry trends, and has a sense of their company's intrinsic values.
So, when iStock saw four insiders at Healthcare Trust of America, Inc. (HTA) buying at the same time, we got to investigating. HTA is a self-administered and internally managed REIT primarily focused on acquiring, owning and operating high-quality medical office buildings that are predominantly located on or aligned with campuses of nationally or regionally recognized healthcare systems.
Last week, the CEO, an Executive VP and two Directors purchased a total of $13,000 shares valued at $147, 650. While the dollar amount might appear small, insiders at the REIT have been buying, buying, and buying stock. We count 20 direct purchases from nine different insiders who bought 169,500 shares totaling $1.69 million since August 2012. There is no mistaking their "opinion" on Healthcare Trust of America.
Studies have shown that investors should pay particular attention CEO purchases. In HTA's case, Scott Peters bought 7,500 shares in June 2013. Peter's most recent check for $84,250 follows a buy of $98,699 in December 2012. The fact that the head honcho continues to buy is encouraging.
It's iStock's opinion that the insiders are buying HTA due to the Affordable Health Care Act a.k.a. Obamacare. Due to cost cutting as a result of the new law, demand for existing medical office space could boom.
Following the Supreme Court Okaying the law, Greg Weigle, P.E., FACHE, director of construction and design at the Medical University of South Carolina said, "Our margins define what we can afford to do and, from what I hear, they are going to shrink. That can't help but have an effect on construction."
Instead, the emphasis, at least early on, will be to renovate existing facilities near or predominantly located on or aligned with medical campuses. We think, the effort to keep costs in line will make Healthcare Trust of America more attractive to health care providers. As a result, iStock believes HTA will have no problem maintaining high occupancy rates, which currently stands at approximately 90.9%.
With that rate, HTA should have no problem maintaining or perhaps raise its 4.8% dividend.
Now, let's consider the healthcare facilities REIT's valuation on a price-to-book (P/B) basis. In the last year, HTA has traded with a P/B range of 1.33 to 2.24 with an average of 1.76. As we type, the REIT trades at 1.98 times the current book-value of $5.93.
Compared to a basket of similar REITs, Healthcare Trust of America trades at the low end of the range of 1.7 to 3.38 times book, and less than the average P/B ratio of 2.34. On a P/B basis, HTA insiders appear to be buying shares at a value relative to peers.
Overall: Healthcare Trust of America, Inc. (HTA) should benefit from demand for medical office buildings/space thanks to Obamacare. Insider buying should give investors confidence that management see the REIT as a "value" at current prices. Plus, the 4.8% dividend is attractive, too.