Insiders 'Agree': This REIT Is A Great Value At These Levels

It's always a good sign for stockholders when they see one of the insiders at a company buying shares of company stock. It's well known that insiders may sell shares for dozens of personal reasons that have nothing to do with the company's performance, but generally, insiders are only buyers when they feel the stock price is undervalued and likely to rise over time.

It's even more significant when multiple insiders are buying shares of company stock, as that indicates optimism among more than one executive who knows the company's performance best.

Such was the case this past week for one real estate investment trust (REIT) in particular, as three different insiders bought thousands of shares of company stock, adding to sizable positions already held.

Take a look at the REIT that insiders "agree" is well worth buying near present levels.

Agree Realty Corp. ADC is a Bloomfield Hills, Michigan-based net-lease REIT that focuses on retail properties. Its portfolio includes just over 2,000 properties totaling 42 million square feet in 49 states. Sixty-eight percent of its tenants are investment grade.

Agree Realty was founded as Agree Development Co. in 1971. It went public as a REIT on the New York Stock Exchange in 1994 as Agree Realty Corp. Some of its largest tenants include well-known names like Walmart Inc. WMT, Best Buy Co. Inc. BBY Dollar General Corp. DG and Kroger Co. KR.

Three company insiders at Agree Realty recently bought large amounts of Agree Realty stock, as reported on Form 4 of the U.S. Securities and Exchange Commission (SEC). These were the purchases made:

Aug. 2: President and CEO Joey Agree bought 10,000 shares of Agree Realty stock at an average price of $62.79, for a total cost of $627,900. Following the purchase, Agree now owns 539,253 shares of Agree Realty stock.

Aug. 2: Director John Rakolta Jr. purchased 30,000 shares of Agree Realty stock at a weighted average price of $63.02 for a total cost of $1.89 million. Rakolta now owns 330,056 shares.

Aug. 2: Richard Agree, a director and executive chairman of the board, purchased 11,750 shares of company stock at an average cost of $62.95, for a total of $739,739. The next day, he added to his total with another purchase of 18,250 shares at an average price of $63.70 for a total of $1.16 million. Agree's now owns 533,290 shares of company stock, although some of them are held indirectly by other family members. 

On Aug. 1, Agree Realty posted its 2023 second-quarter operating results. Adjusted funds from operations (AFFO) of $0.98 was in line with estimates and was a penny above the second quarter of 2022. Revenue of $129.9 million missed estimates of $130.64 million but was 23.9% higher than revenue of $104.88 million in the second quarter of 2022.

The timing of the purchases, occurring after a price drop following the earnings announcement, demonstrates a keen sense of technical acumen. Over the past year, on numerous occasions when Agree Realty shares traded between $62.60 and $63.50, it found strong market support, leading to subsequent increases of several dollars.

Like many other REITs, Agree Realty has struggled this year and has a total year-to-date return of negative 8.79%.

Agree Realty Corp. pays a monthly dividend of $0.243, with an annual $2.916 dividend that presently yields 4.54%.

Analysts are moderately bullish on Agree Realty. On Aug. 2, Stifel analyst Simon Yarmak maintained a Buy rating on Agree Realty and raised the price target from $76 to $76.50. The following day, RBC Capital Markets analyst Brad Heffern maintained an Outperform rating on Agree Realty but lowered his price target from $75 to $74.

The stock market is quite complex right now, especially for REITs, as investors grapple with the challenge of determining whether inflation is diminishing slowly, quickly or not at all. It will be interesting to see whether investors also agree with these insiders that now could be an opportune time to purchase shares of Agree Realty Trust.

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