REITs a Treat for Insiders

As Christopher Edmonds has been telling you, investors in real estate investment trusts , or REITs, can finally walk with their heads held high. That goes double for REIT insiders. Long among the most supportive of their companies' shares (and just as long among the most maligned for their efforts), REIT execs have something to cheer about. And believe me, I am not about to rain on their parade. Not just yet, anyway.

Back in the dog days, we noted the propensity of REIT boards to approve loans to executives for the purpose of purchasing shares. As a result, you had to be especially careful when assigning significance to accumulation in the group as a whole. Now that the stocks have rebounded, insider behavior in the group is a different animal altogether.

They're far from rampant, but individual cases of insider profit-taking are on the rise in the group. Consider CarrAmerica Realty (CRE Quote - Cramer on CRE - Stock Picks). After drifting lower from 1997 through the end of last year, CarrAmerica is up roughly 40% year to date. Maybe it's no surprise that insiders at the company are locking in some of their surprise windfall.

Either way, since Aug. 8, four CarrAmerica executives filed Form 144 intentions to sell a combined 167,250 shares at around $30. If that doesn't sound like much, consider that since the company's 1993 initial public offering , insiders have only sold a total of 682,154 shares -- nearly 640,000 of which were sold by former Chairman Oliver Carr Jr. back in 1993. That leaves just 42,000 shares sold by all other company insiders over more than five years.

At Equity Residential Properties (EQR Quote - Cramer on EQR - Stock Picks), insiders began selling back in May. Recently, they've cranked it up a notch, selling a combined 111,100 shares at $46.25 to $48.69 since June 7. This is particularly interesting given that insiders at the company, led by real estate icon Sam Zell (not among the recent sellers), exercised options to acquire more than 190,000 Equity Residential shares in the final three months of last year.

Meanwhile, there's a slew of situations where REIT insiders are sitting tight. In some cases, they are holding onto stocks that have performed remarkably well. West Coasters Mission West Properties (MSW Quote - Cramer on MSW - Stock Picks) and Pacific Gulf Properties (PAG Quote - Cramer on PAG - Stock Picks) stand out in this group. Indeed, insiders at Pacific Gulf Properties continued to accumulate shares well into the recent run-up.

Not even the insiders can tell us precisely how long the good times will roll for the REITs. If you're a holder, congratulations. If you're a long-term holder, you certainly deserve it. Going forward, it may not hurt to notice which of these other knowledgeable investors are breaking ranks and cashing in on their newfound (good) fortune.

Kvamme the Man

If you follow corporate insiders, the name E. Floyd Kvamme probably rings a bell -- or two. A partner at high-tech venture capital firm Kleiner Perkins Caufield & Beyers, Kvamme is known for developing high-tech start-ups into publicly traded dynamos. He also sits on the boards of a number of well-known, established technology companies. Over the years, insider-watchers have had a lot of fun (and a lot of luck) following his SEC paper trail.

Recent disappointments have not prevented Kvamme from acquiring shares at both Harmonic (HLIT Quote - Cramer on HLIT - Stock Picks) and Brio Technology (BRIO Quote - Cramer on BRIO - Stock Picks). At beleaguered Harmonic, Kvamme purchased 40,000 shares at $29.60 apiece on July 24, shortly after the company preannounced that earnings would not meet second-quarter estimates.

At about the same time, Kvamme made his first-ever purchase at Brio, acquiring 100,000 shares at $8.06 per share. In case you've forgotten, Brio plummeted more than 55% on July 7 after the company preannounced that earnings and revenue would fall substantially short of expectations.

Sound scary? Well, for what it's worth, Kvamme last caught our eye buying Harmonic at 11.12 back in January 1999. Not too shabby, considering that the stock peaked in March of this year at more than 150. It'll be interesting to see whether lightning can strike again.