Blackstone Mortgage Trust, Inc., a real estate finance company, originates senior loans collateralized by properties in North America and Europe. Blackstone Mortgage Trust is one of United States’s large-cap stocks that saw some insider selling over the past three months, with insiders divesting from 1.94k shares during this period. Generally, insiders selling shares in their own firm sends a bearish signal. A two-decade research published in The MIT Press (1998) showed that stocks following insider selling declined 2.7% relative to the market. However, these signals may not be enough to gain conviction on whether to divest. I’ve analysed two possible reasons driving the insiders’ decision to reduce their investment of late.
Which Insiders Are Selling?
More shares have been sold than bought by Blackstone Mortgage Trust’s insiders in the past three months. In total, individual insiders own over 1.19 million shares in the business, which makes up around 1.1% of total shares outstanding. Insiders that have recently trimmed down their holdings are:
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Is This Consistent With Future Growth?Analysts’ expectations for earnings over the next 3 years of 8.08% provides a moderated outlook moving forward. Insiders may be more cautious than the market as signalled by their net selling activity. Delving deeper into the line items, analysts anticipate a double-digit top-line growth over the next year, which appears to flow through to an earnings growth of 15.78%. High levels of sustained revenue growth as well as improved cost management could see higher levels of future earnings. Though this buoyant outlook is counter to insider selling activities, indicating they may know something the market does not. Insiders could see the double-digit growth as not sustainable or perhaps the positive sentiment has inflated the stock.
Can Share Price Volatility Explain The Sell?An alternative reason for recent trades could be insiders taking advantage of the share price volatility. Volatility provides an opportunity to trade on market inefficiencies when the stock is under-priced compared to the stock’s intrinsic value. Blackstone Mortgage Trust’s shares ranged between $32.77 and $30.48 over the past three months. This indicates a trivial share price movement, with a change of 7.51%. This may mean insiders’ motivation to trade may not be driven by the share price but rather other factors such as their belief in company growth or their personal portfolio diversification needs.
Blackstone Mortgage Trust’s net selling activity tells us the stock has fallen out of favour with some insiders as of late, although the positive expected earnings growth challenges this assumption, and the relatively stable stock price may not warrant exploiting any mispricing. However it’s crucial to note that insider divesting may have nothing to do with their views on the company’s future performance. Furthermore, while insider transactions could be a helpful signal, it is definitely not sufficient on its own to make an investment decision. there are two key aspects you should look at:
- Financial Health: Does Blackstone Mortgage Trust have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Other High Quality Alternatives : Are there other high quality stocks you could be holding instead of Blackstone Mortgage Trust? Explore our interactive list of high quality stocks to get an idea of what else is out there you may be missing!
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.