It is not uncommon to see companies perform well in the years after insiders buy shares. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So we’ll take a look at whether insiders have been buying or selling shares in Shake Shack Inc. (NYSE:SHAK).
What Is Insider Selling?
It’s quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, such insiders must disclose their trading activities, and not trade on inside information.
We don’t think shareholders should simply follow insider transactions. But equally, we would consider it foolish to ignore insider transactions altogether. 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 Shake Shack
Over the last year, we can see that the biggest insider sale was by Director Jeffrey Flug for US$3.9m worth of shares, at about US$41.31 per share. That means that an insider was selling shares at slightly below the current price (US$49.32). While their view may have changed since they sold, this isn’t a particularly bullish sign. When an insider sells below the current price, it does tend to make us wonder about the current valuation. Please note, however, that this single sale was 64.3% of Jeffrey Flug’s stake.
In the last twelve months insiders netted US$19m for 380.57k shares sold. All up, insiders sold more shares in Shake Shack than they bought, over the last year. The average sell price was around US$48.79. It’s not particularly great to see insiders were selling shares around current prices. Since insiders sell for many reasons, we wouldn’t put too much weight on it. The chart below shows insider transactions (by individuals) over the last year. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Insiders at Shake Shack Have Sold Stock Recently
The last quarter saw substantial insider selling of Shake Shack shares. Specifically, Jeffrey Flug ditched US$2.0m worth of shares in that time, and we didn’t record any purchases whatsoever. This may suggest that some insiders think that the shares are not cheap.
For a common shareholder, it is worth checking how many shares are held by company insiders. A high insider ownership often makes company leadership more mindful of shareholder interests. It appears that Shake Shack insiders own 1.7% of the company, worth about US$30m. We’ve certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.
What Might The Insider Transactions At Shake Shack Tell Us?
An insider sold Shake Shack shares recently, but they didn’t buy any. Looking to the last twelve months, our data doesn’t show any insider buying. Insider ownership isn’t particularly high, so this analysis makes us cautious about the company. We’d think twice before buying! If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.