Insiders Picking Up Global Signal

Over the past year, four directors have invested approximately $11 million in Global Signal at an average price of over $30. While much of the money came from investment partnerships the directors are involved with, Robert Niehaus also kicked in $4.6 million of his own money. Niehaus' direct buying is particularly interesting because he seems to be selling shares of Greenhill & Co.(GHL Quote) to fund purchases. Greenhill is an investment banking firm he is associated with that also owns Global Signal. One gets a good sense of which security he thinks is the better relative value.

Howard Rubin's transactions are also direct, and this savvy player has traded his holdings of Capstead Mortgage(CMO Quote) very well in the past.

Adding to Global Signal's bullish insider profile, eight insiders exercised options in January of this year that weren't close to expiration. All of these exercisers elected to sell only a portion of their grant for a risk-free profit -- presumably to help pay for the exercise price and/or tax liabilities. This is yet another bullish pattern because the only logical explanation for not selling the entire grant immediately is that these insiders expect the stock to rise over the coming year, allowing them to pay lower capital-gains taxes after they qualify for long-term treatment.

Yield vs. Uncertainties

I view Global Signal as a low- to moderate-risk position that could deliver total returns of at least 15% to 20% in the next year. I base my assessment of low risk on the company's yield prospects, stable near-term cash flows and overall prospects of its industry.

The financial risk in Global Signal has dropped substantially since it returned from bankruptcy. However, the just-closed deal with Sprint is the new uncertainty that could either allow Global Signal to increase its payout more than expected, or hamper its ability to grow -- thus making the stock fully valued at current prices.

Unfortunately, there is just not enough known yet about the Sprint assets just leased to establish future expectations properly. This is both the major risk and reward factor I see to my Global Signal investment in the near term. Sprint's subleasing of space on most of the towers it just relinquished may give Global predictable revenue for the near future, but if the sublease terms end up keeping Global from using the towers to generate greater rental dollars further out, revenue growth could be hampered.

Likewise, little has been communicated about how much extra space there is on the Sprint towers that can be used to generate new income. Towers are vertical pieces of real estate on which communications platforms are attached. The more open real estate on the tower, the more new revenue that can be produced. If there is more space available to Global than now expected, shares should spurt much higher after that information is made public. Of course, disappointing news on this front can be expected to harm Global Signal.