American Assets Trust, Inc (NYSE: AAT) Chairman and CEO has been buying large quantities of stock since May. These transactions are notable considering the stock is trading at such a low valuation. Value investors may want to take a closer look at the company.
Check out our H2 hedge fund letters here.
Insider Buying: American Assets Trust
Ernest Rady, Chairman, President and CEO, bought 304,916 shares of American Assets worth a total of $9.8 million since the beginning of March.
This is what originally enticed me to take a closer look at the company's insider activity.
|Insider Trading||Relationship||Date||#Shares||Value ($)|
|Ernest Rady||Chairman, CEO & President||Mar 09||31,172||$999,374|
|Ernest Rady||Chairman, CEO & President||Mar 08||36,789||$1,188,653|
|Ernest Rady||Chairman, CEO & President||Mar 07||41,635||$1,345,227|
|Ernest Rady||Chairman, CEO & President||Mar 06||26,681||$856,193|
|Ernest Rady||Chairman, CEO & President||Mar 05||36,399||$1,170,956|
|Ernest Rady||Chairman, CEO & President||Mar 02||75,042||$2,375,079|
|Ernest Rady||Chairman, CEO & President||Mar 01||57,198||$1,818,324|
What's more interesting in fact, Ernest Rady has bought $53.7 million worth of stock since May of last year according to recent SEC filings. That's roughly 2.6% of the company's total market capitalization. Mr. Rady now owns roughly 12% of the company's total equity.
Ernest Rady founded American Assets Trust in 1967 and has been its Executive Chairman of The Board since January 2011. Mr. Rady has been the Chief Executive Officer and President of American Assets Trust since September 14, 2015. He also serves as the company's Chief Investment Officer and Managing Member. Needless to say, Mr. Rady has a deep knowledge of the firm.
American Assets Trust's Returns and Valuation
American Assets Trust is a full service, vertically integrated and self-administered real estate investment trust, or REIT, headquartered in San Diego, California. The company has over 50 years of experience in acquiring, improving, developing and managing premier retail, office and residential properties throughout the United States. In 2011, the company was formed to succeed to the real estate business of American Assets, Inc., a privately held corporation founded by Mr. Rady in 1967 and, as such, has significant experience, long-standing relationships and extensive knowledge of its core markets, submarkets and asset classes.
The company's shares last traded at $32.14 as of Monday morning, down -23.1% over the last year. While the stock is near its low, could the recent insider transactions signal a promising road ahead for shareholders?
Analysts covering the stock often compare the company to a peer group that includes Kite Realty (NYSE: KRG), Gramercy Property (NYSE: GPT), VEREIT (NYSE: VER) and Rexford Industrial Realty (NYSE: REXR). Analyzing American Assets Trust's returns relative to these peers provides further insight into why Mr. Rady is buying shares.
Return on Equity (ROE) measures a company's profitability in relation to the book value of Shareholders' Equity. ROE is a measure of how effectively management makes investments to generate earnings for shareholders.
The company's ROE of 3.7% is above all of its selected comparable public companies: KRG (0.7%), GPT (3.7%), VER (-1.4%) and REXR (3.3%).
Return on Invested Capital (ROIC) is used to evaluate the ability of a company to create value for all its stakeholders, debt and equity. The company's ROIC of 3.6% is also above all of its selected peers.
In addition, finbox.io applies pre-built valuation models to calculate a fair value for a given stock and uses consensus Wall Street estimates for the forecast when available. The company's average fair value of $37.88 implies 17.9% upside and is calculated from 7 separate analyses as shown in the table above.
|Analysis||Model Fair Value||Upside (Downside)|
|10-yr DCF Revenue Exit||$40.87||27.2%|
|5-yr DCF Revenue Exit||$33.65||4.7%|
|Peer Revenue Multiples||$54.30||68.9%|
|10-yr DCF EBITDA Exit||$28.90||-10.1%|
|5-yr DCF EBITDA Exit||$33.03||2.8%|
|Peer EBITDA Multiples||$48.83||51.9%|
|Peer P/E Multiples||$25.60||-20.4%|
While insider activity on its own is not necessarily a buy or sell signal, it may offer insight into how ownership and management feel about a company's future prospects. Keeping an eye on the activities of insiders and institutions can help investors make more informed investment decisions.
I recommend you continue to research American Assets Trust to get a more comprehensive view of the company by looking at:
Risk Metrics: what is American Assets Trust's CapEx coverage? This is the amount a company outlays for capital assets for each dollar it generates from those investments. View the company's CapEx coverage here.
Efficiency Metrics: how much free cash flow does American Assets Trust generate as a percentage of total sales? Has it been increasing or decreasing over time? Review the firm's free cash flow margin here.
Forecast Metrics: what is American Assets Trust's projected earnings growth? Is the company expected to grow faster or slower relative to its peers? Analyze the company's projected earnings growth here.
Article by Brian Dentino, Finbox.io