AHH: Insiders Vs. Shorts

The most recent short interest data was recently released by the NASDAQ for the 10/15/2013 settlement date, and Armada Hoffler Properties Inc (AHH) is one of the most shorted stocks of the Russell 3000, based on 10.84 "days to cover" versus the median component at 4.95. There are a number of ways to look at short data, but one metric that we find particularly useful is the "days to cover" because it considers both the total shares short and the average daily volume of shares typically traded. The number of shares short is then divided by the average daily volume, to express the total number of trading days it would take to close out all of the open short positions if every share traded represented a short position being closed.

START SLIDESHOW:
Ten Bargains You Can Buy Cheaper Than The Insiders Did »

In the case of Armada Hoffler Properties Inc ( AHH), the total short interest at the 10/15/2013 settlement date was 595,894 shares, which compares to the average daily trading volume of just 54,973 shares, for a "days to cover" ratio of 10.84.

When short sellers eventually cover their positions, by definition there must be buying activity because a share that is currently sold short must be purchased to be covered. At the present levels of short interest, if from this point forward every single AHH share traded represented a short position being closed, then at the average daily volume of 54,973 shares it would only be during the 11th trading day that every short position would be closed.

So it would stand to reason that should some unexpectedly good news come out, and short sellers did not have 11 days of patience but instead wanted to cover their short positions very suddenly, that situation could result in sending the stock higher until the higher price produces enough sellers to generate the necessary volume to close out those positions quickly.

Armada Hoffler Properties Inc ( AHH) has something relatively rare for a stock with this much short interest, that being insiders taking the other side of the trade. Looking back over the trailing six month period, AHH has seen 3 different instances of insider buying, as summarized by the table below:

Purchased Insider Title Shares Price/Share Value
05/13/2013 A. Russell Kirk Director 5,000 $11.50 $57,500.00
05/13/2013 James C. Cherry Director 4,400 $11.50 $50,600.00
05/13/2013 James A. Carroll Director 1,600 $11.50 $18,400.00
05/13/2013 George F. Allen Director 3,827 $11.50 $44,010.50
05/13/2013 John W. Snow Director 20,000 $11.50 $230,000.00
08/20/2013 Daniel A. Hoffler Director 50,000 $9.24 $462,000.00
08/21/2013 A. Russell Kirk Director 26,819 $9.27 $248,562.22
08/20/2013 Louis S. Haddad President, CEO 50,000 $9.20 $460,000.00
08/22/2013 A. Russell Kirk Director 400 $9.25 $3,700.00
09/04/2013 Daniel A. Hoffler Director 27,500 $9.45 $259,875.00
09/05/2013 A. Russell Kirk Director 11,789 $9.28 $109,401.92

Below is a chart showing the "days to cover" for AHH over time:

Loading+chart++2013+TickerTech.com

And looking at the chart below, AHH's low point in its 52 week range is $8.89 per share, with $11.85 as the 52 week high point — that compares with a last trade of $9.63.

Armada Hoffler Properties Inc Moving Averages Chart

In recent trading, shares of Armada Hoffler Properties Inc ( AHH) were changing hands at $9.63/share.

null

More from Stocks

Earnings, Earnings and More Earnings - Your Midweek Update From Facebook to Ford

Earnings, Earnings and More Earnings - Your Midweek Update From Facebook to Ford

Facebook Just Announced a Major Share Buyback Program

Facebook Just Announced a Major Share Buyback Program

Veteran Foreign Affairs Expert Ian Bremmer Reveals How to Price Political Risk

Veteran Foreign Affairs Expert Ian Bremmer Reveals How to Price Political Risk

Earnings Season Is Simply Out of Control Madness - How Are You Surviving?

Earnings Season Is Simply Out of Control Madness - How Are You Surviving?

Key Numbers for Investors to Watch as Amazon, Microsoft and Intel Report Results

Key Numbers for Investors to Watch as Amazon, Microsoft and Intel Report Results