It is not uncommon to see companies perform well in the years after insiders buy shares. The flip side of that is that there are more than a few examples of insiders dumping stock prior to a period of weak performance. So shareholders might well want to know whether insiders have been buying or selling shares in Red Rock Resorts, Inc. (NASDAQ:RRR).
Do Insider Transactions Matter?
Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock in the company. However, most countries require that the company discloses such transactions to the market.
Insider transactions are not the most important thing when it comes to long-term investing. But logic dictates you should pay some attention to whether insiders are buying or selling shares. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year'.
The Last 12 Months Of Insider Transactions At Red Rock Resorts
The Chairman & CEO Frank Fertitta made the biggest insider purchase in the last 12 months. That single transaction was for US$10.0m worth of shares at a price of US$14.12 each. Even though the purchase was made at a significantly lower price than the recent price (US$33.59), we still think insider buying is a positive. While it does suggest insiders consider the stock undervalued at lower prices, this transaction doesn't tell us much about what they think of current prices.
In the last twelve months Red Rock Resorts insiders were buying shares, but not selling. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!
Red Rock Resorts is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Many investors like to check how much of a company is owned by insiders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. It's great to see that Red Rock Resorts insiders own 7.5% of the company, worth about US$298m. Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.
So What Do The Red Rock Resorts Insider Transactions Indicate?
The fact that there have been no Red Rock Resorts insider transactions recently certainly doesn't bother us. However, our analysis of transactions over the last year is heartening. It would be great to see more insider buying, but overall it seems like Red Rock Resorts insiders are reasonably well aligned (owning significant chunk of the company's shares) and optimistic for the future. So while it's helpful to know what insiders are doing in terms of buying or selling, it's also helpful to know the risks that a particular company is facing. For instance, we've identified 2 warning signs for Red Rock Resorts (1 is significant) you should be aware of.
Of course Red Rock Resorts may not be the best stock to buy. So you may wish to see this free collection of high quality companies.
For the purposes of this article, insiders are those individuals who report their transactions to the relevant regulatory body. We currently account for open market transactions and private dispositions, but not derivative transactions.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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