Multiple insiders have been buying stock in Ingersoll-Rand PLC (NYSE:IR), which has recently announced plans to spin out its security business. In theory the spinout should make it easier for Ingersoll-Rand PLC (NYSE:IR)’s management to focus on core operations; in addition, the security business may be valued at a higher earnings multiple in the market than the rest of the company. Our analysis is that if the security business trades at a similar multiple to peer ADT, the parent company would be valued at 16 times trailing earnings with the potential to improve the business from that point.
In addition to insider trading activity, we maintain a database of quarterly 13F filings from hundreds of hedge funds and other notable investors. Using this information, we’ve found that the most popular small cap stocks among hedge funds earn an average excess return of 18 percentage points per year (learn more about our small cap strategy) and our own portfolio of hedge funds’ favorite small caps has outperformed the S&P 500 by over 30 percentage points in the last 11 months. According to our database, billionaire activist Nelson Peltz’s Trian Partners owned more than 13 million shares of Ingersoll-Rand PLC (NYSE:IR) at the end of March (find Peltz’s favorite stocks).
A member of the Board of Directors at Basic Energy Services, Inc (NYSE:BAS) bought close to 16,000 shares of the oilfield services company at the end of July. Basic Energy Services, Inc (NYSE:BAS)’s market cap is only about $480 million, but between the price of $12 per share and the fact that over 600,000 shares are traded per day there is plenty of daily dollar volume. Revenue has been down significantly, and the stock is expensive in earnings terms with a forward P/E of more than 50. With many market players bearish on Basic Energy Services, Inc (NYSE:BAS), 17% of the float is held short.
An insider bought 10,000 shares of intellectual property management services company RPX Corp (NASDAQ:RPXC) on August 2nd. The stock is up 67% year to date, even after a slight correction in late July that likely served as the driver of this insider purchase. Even though RPX Corp (NASDAQ:RPXC)’s revenue was up in the second quarter of 2013 versus a year earlier, higher costs generated a 19% decrease in profits. Thanks to a good Q1 earnings are still up for the year, but the trailing P/E of 20 demonstrates that RPX Corp (NASDAQ:RPXC) is dependent on future growth making the weak quarter a troubling sign.
Digital Realty Trust, Inc. (NYSE:DLR) is another stock seeing an insider buy shares recently. As a real estate investment trust, Digital Realty Trust, Inc. (NYSE:DLR) receives favorable tax treatment condition on distributing a large share of taxable income to shareholders. As with many REITs, this results in a high dividend yield; the stock’s annual yield is 5.7% following an increase in the quarterly dividend earlier this year. Digital Realty Trust, Inc. (NYSE:DLR) invests in real estate related to the technology sector, including technology offices and corporate data centers. The stock dropped 9% in July and is down 21% year to date.
Another REIT with recent insider buying is Hersha Hospitality Trust (NYSE:HT). The $1.1 billion market cap company invests in hotels; at current prices and dividend levels, its annual yield is 4.3%. We would note, however, that quarterly dividend payments are still only a third of what they were prior to the financial crisis. This demonstrates that the company would be vulnerable to any future economic shocks. Hersha Hospitality Trust (NYSE:HT)’s stock also plunged in late July, and while its stock price is up year to date the 9% return is well below what the S&P 500 has done.
With that in mind, here are a couple stories that may get your mind off of the markets:
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Disclosure: I own no shares of any stocks mentioned in this article.
