There is the often repeated mantra in financial markets saying: If corporate insiders are buying shares of their company, it is a positive indicator. At the end of the day, Board members and executives sell for many different reasons, but they only buy for one reason. Well-known investment guru Peter Lynch also said something along these lines. This argument seems to make perfect sense. If corporate insiders are spending their hard earned money to buy shares of their own company, it can mean only one thing: they believe the stock will reach higher price levels in the future.
However, the investment community should be aware that there are cases when tracking insider buying can lead to disastrous outcomes. Corporate insiders, particularly top-tier executives, may overestimate the prospects of their company on certain occasions. By drawing parallels between this statement and some examples in financial markets, one could easily arrive at the conclusion that insider buying usually serves as a good sign, but additional research needs to be completed prior to making an investment decision on whether to buy a company’s stock or not. With that in mind, let’s have a look at a set of notable insider transactions reported with the SEC on Tuesday.
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Co-Founder and Board Member at Well-Known Creative Software Maker Discard Shares
Two corporate insiders at Adobe Systems Incorporated (NASDAQ:ADBE) offloaded shares this week. To begin with, John E. Warnock, who co-founded Adobe Systems in 1982 and currently serves as Co-Chairman of the company’s Board, discarded 5,000 shares on Tuesday at $106.99 apiece. The shares were held in the Warnock Family Trust, which currently owns 571,600 shares. Dr. Warnock also holds a direct ownership stake of 16,088 shares. Board member Daniel L. Rosensweig sold 13,000 shares on Monday at prices varying from $107.41 to $107.43 per share, a block of shares held indirectly by a trust for the benefit of Mr. Rosensweig’s children. Mr. Rosensweig also owns 13,000 shares directly.
The shares of the maker of software used to design, publish and market digital content are up 16% thus far in 2016. Just recently, the creative software maker and Microsoft Corporation (NASDAQ:MSFT) inked a partnership that enables the two companies to sell their cloud computing products to their mutual customers. Under the terms of the freshly-inked partnership, Adobe Systems Incorporated (NASDAQ:ADBE) is set to make Microsoft Azure – Microsoft’s cloud computing services – its preferred cloud platform for its business software tools such as Adobe Marketing Cloud, Adobe Creative Cloud and Adobe Document Cloud. In turn, Microsoft is set to make Adobe Marketing Cloud the preferred marketing service for its Dynamics 365 product, used by companies to monitor sales leads and relationships with customers. Stephen Mandel’s Lone Pine Capital reported ownership of around 5.00 million shares of Adobe Systems Incorporated (NASDAQ:ADBE) in its 13F filing for the second quarter.
The next two pages of this article will discuss another set of noteworthy insider transactions reported with the SEC on Tuesday.