Company insiders are some of the most informed participants in the market and research shows that their trading activity can provide powerful return signals. If insiders are buying stock, investors should pay attention.
In this report, we are going to highlight some interesting insider buying at the Howard Hughes Corporation (HHC:US). Howard Hughes is an American real estate company that owns, manages, and develops commercial, residential and mixed-use property. Its portfolio is strategically positioned to meet and accelerate development based on market demand, with the goal of generating sustainable, long-term growth and value for shareholders. The company is listed on the New York Stock Exchange and currently has a market capitalization of $4.6 billion.
Howard Hughes Corp: Insider Buying
Our records show that on 6 January, Pershing Square Capital Management, the hedge fund run by Bill Ackman, purchased 1.942 million shares in Howard Hughes at a price of $79.12 per share. This purchase cost the hedge fund approximately $154 million.
Additionally, Pershing also sold 3.463 million put options on HHC on 6 January. Investors sell puts on stocks they would like to own and believe are currently undervalued.
High insider IQ
This insider activity is significant for a few reasons.
Firstly, Ackman is Chairman of the Board at Howard Hughes. So, he is likely to have a very good understanding of the real estate company. This purchase has boosted his position by nearly 20%, which suggests he is confident about the future.
Secondly, Ackman’s last purchase of HHC stock was timed very well. Last year, we noted that Ackman had spent a substantial amount of money on HHC in late March. Since then, the stock has risen from $50 to $85.
Third, Ackman is having a very strong run at the moment. During the Covid-19 sell-off last year, he turned $27 million into $2.6 billion for his investors.
Growth In New Home SalesLike most real estate companies, Howard Hughes was impacted significantly by the coronavirus last year. As a result of the outbreak, the company was forced to delay construction projects and reduce its workforce.
However, third-quarter results, posted in November, showed that the business environment is improving. While third-quarter land sales were lower compared to the third quarter of 2019 as a result of timing related to superpad sales in its Summerlin development in Nevada, growth in new home sales, a leading indicator for future land sales, continued to expand in its Woodlands Hills, Bridgeland, and Summerlin master-planned communities (MPCs).
"While the impact of Covid-19 affected all of our business segments in the first half of the year, we saw notable performance improvements and significant sales momentum during the third quarter," said David O'Reilly, Interim Chief Executive Officer; President and Chief Financial Officer. "We believe our high-quality assets and strategically located master planned communities put The Howard Hughes Corporation in an excellent position to thrive in a post-Covid environment," he added.
Given this encouraging update, we see the insider buying here from Bill Ackman as bullish.