For bullish investors, the recent drop-off for the stock market provided one very good thing: cheaper stocks.
But while that may sound like Wall Street is having some blowout sale, just understand that not everything is a good buy because its price has fallen significantly.
That’s why I’ve zeroed in on one intriguing stock in particular. It’s time to find out if its shares are 50% off, or if this stock is headed for even lower prices…
If you went to the chart for Shake Shack (SHAK) right now, you’d see that shares are priced at around $50 each right now, and were down to $45 each as recently as last week.
But the most interesting thing you’d glean from the chart is that share prices hit over $95 back in May!
So from May to last week, we saw a drop of 50%.
But does that mean shares are now at a 50% discount, or is this a sign of things to come?
My general rule of thumb is that the current price is the price for a reason. That’s something to always have in the back of your head, even if you’re digging through earnings data and all the fundamentals.
But even so, the share price will change in some way from evolving investor sentiment or a development in the strategy/performance of the company in question.
And when I’m dealing with a stock as young as SHAK, which has only been publicly traded since January of this year, I like to let the insiders show me their thoughts on their own company’s stock…
That’s why I dug into the recent actions of SHAK’s company officers, directors, and 10% owners to find out how strong they think this stock is.
Apparently not very strong.
Just in the latter parts of August alone, there have been more than 870,000 shares sold by 18 different insiders – that’s a value of approximately $50 million!
If you couple that with the fact that there have been 0 insider purchases in that time, it’s clear to see that SHAK’s insiders aren’t exactly chomping at the bit to grab more shares.
That tells me that we shouldn’t expect SHAK to return to those highs from back in May anytime soon, especially with a stock market that’s just taken a heavy blow.
So instead of looking to buy SHAK, I’m now preparing to short it should it give me a strong enough signal to do so…
