Yahoo Finance Insiders of Drive Shack Inc. (NYSE:DS) are up 17% on their US$5.3m purchase after Drive Shack Inc. (NYSE:DS) rose 17% last week
Insiders who bought Drive Shack Inc. (NYSE:DS) stock in the last 12 months were richly rewarded last week. The company's market value increased by US$20m as a result of the stock's 17% gain over the same period. As a result, the stock they originally bought for US$5.3m is now worth US$6.2m.
Although we don't think shareholders should simply follow insider transactions, we do think it is perfectly logical to keep tabs on what insiders are doing.
See our latest analysis for Drive Shack
Drive Shack Insider Transactions Over The Last Year
In the last twelve months, the biggest single purchase by an insider was when Chairman Wesley Edens bought US$3.0m worth of shares at a price of US$1.67 per share. So it's clear an insider wanted to buy, even at a higher price than the current share price (being US$1.54). Their view may have changed since then, but at least it shows they felt optimistic at the time. In our view, the price an insider pays for shares is very important. As a general rule, we feel more positive about a stock if insiders have bought shares at above current prices, because that suggests they viewed the stock as good value, even at a higher price.
While Drive Shack insiders bought shares during the last year, they didn't sell. The average buy price was around US$1.31. To my mind it is good that insiders have invested their own money in the company. But we must note that the investments were made at well below today's share price. The chart below shows insider transactions (by companies and individuals) over the last year. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
Drive Shack is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Drive Shack Insiders Bought Stock Recently
It's good to see that Drive Shack insiders have made notable investments in the company's shares. Not only was there no selling that we can see, but they collectively bought US$5.3m worth of shares. This is a positive in our book as it implies some confidence.
Insider Ownership of Drive Shack
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Insiders own 13% of Drive Shack shares, worth about US$18m. We've certainly seen higher levels of insider ownership elsewhere, but these holdings are enough to suggest alignment between insiders and the other shareholders.
So What Do The Drive Shack Insider Transactions Indicate?
The recent insider purchases are heartening. And an analysis of the transactions over the last year also gives us confidence. But on the other hand, the company made a loss during the last year, which makes us a little cautious. Given that insiders also own a fair bit of Drive Shack we think they are probably pretty confident of a bright future. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. For instance, we've identified 3 warning signs for Drive Shack (1 is significant) you should be aware of.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.
