We’ve lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. On the other hand, we’d be remiss not to mention that insider sales have been known to precede tough periods for a business. So shareholders might well want to know whether insiders have been buying or selling shares in Red Rock Resorts, Inc. (NASDAQ:RRR).
What Is Insider Selling?
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, such insiders must disclose their trading activities, and not trade on inside information.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But it is perfectly logical to keep tabs on what insiders are doing. 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
Over the last year, we can see that the biggest insider purchase was by Vice Chairman of the Board Lorenzo Fertitta for US$10.0m worth of shares, at about US$14.12 per share. That means that an insider was happy to buy shares at around the current price of US$16.30. While their view may have changed since the purchase was made, this does at least suggest they have had confidence in the company’s future. While we always like to see insider buying, it’s less meaningful if the purchases were made at much lower prices, as the opportunity they saw may have passed. The good news for Red Rock Resorts share holders is that insiders were buying at near the current price.
Red Rock Resorts insiders may have bought shares in the last year, but they didn’t sell any. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, 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.
Red Rock Resorts Insiders Bought Stock Recently
Over the last three months, we’ve seen significant insider buying at Red Rock Resorts. Overall, two insiders shelled out US$72m for shares in the company — and none sold. This is a positive in our book as it implies some confidence.
Does Red Rock Resorts Boast High Insider Ownership?
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. I reckon it’s a good sign if insiders own a significant number of shares in the company. Red Rock Resorts insiders own 7.8% of the company, currently worth about US$158m based on the recent share price. This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all shareholders.
What Might The Insider Transactions At Red Rock Resorts Tell Us?
It is good to see recent purchasing. We also take confidence from the longer term picture of insider transactions. However, we note that the company didn’t make a profit over the last twelve months, which makes us cautious. Along with the high insider ownership, this analysis suggests that insiders are quite bullish about Red Rock Resorts. Looks promising! So these insider transactions can help us build a thesis about the stock, but it’s also worthwhile knowing the risks facing this company. At Simply Wall St, we’ve found that Red Rock Resorts has 2 warning signs (1 is potentially serious!) that deserve your attention before going any further with your analysis.
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.
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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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