Peeking Into a New Insider Buy

Over at Rouse Properties (RSE), we saw a substantial round of insider buys last week: On March 21, CEO Andrew Silberfein and CFO John Wain bought 15,000 shares and 1,500 shares, respectively, at about $16.90 apiece. As with all insider purchases, this one is worth a further look, as stocks bought by insiders tend to outperform the market; in our opinion, this is because insider buying signals particularly high confidence, since the rational move would be avoiding too much company-specific risk. Moreover, because two insiders are buying Rouse -- making this a "consensus" buy -- this is considered particularly bullish, per studies.

Rouse has $850 million in market capitalization, and it owns and manages 30 U.S. shopping malls. It was spun out from General Growth Properties (GGP), a larger retail manager, early last year -- at which point its assets had been considered less attractive, with lower occupancy and rental rates than the parent company. But the stock has risen 43% since shortly after the market debut -- outperforming General Growth -- on trading volume that's lately totaled more than 200,000 shares per day. This illustrates why spinouts are attractive to a great deal of hedge funds and other value investors: After such moves, management becomes free to focus on strategic initiatives unique to their assets, without worrying about the larger company....277 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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