Most Notable Insider Transactions Include Heavy Insider Selling at Adobe Systems and Argan

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.

CFO of Maker of Sodas Buys Company Shares as Investment

A well-informed and influential executive at Reed’s Inc. (NYSEMKT:REED) purchased some shares earlier this week. Chief Financial Officer Daniel V. Miles acquired 8,000 shares on Tuesday at a price tag of $3.62 each. After the recent transaction, Mr. Miles currently owns 38,000 shares. The Form 4 filing filed by the CFO indicated that the shares were bought on the open market as investment, which essentially implies that the shares of Reed’s are undervalued and are poised to go higher in the foreseeable future according to Mr. Miles.

The maker of natural non-alcoholic carbonated soft drinks, Kombucha, candies and ice creams has seen the value of its shares fall by 32% since the beginning of the year. Reed’s Inc. (NYSEMKT:REED) reported gross sales of $11.84 million for the second quarter, down from $13.17 million posted for the same period of the prior year. Despite the top-line decline, the company’s loss from operations decreased by $146,000 year-on-year to $493,000, reflecting margin improvement and significant cost containment. Jim Simons’ Renaissance Technologies LLC was the owner of 109,500 shares of Reed’s Inc. (NYSEMKT:REED) at the end of the second quarter.

Board Member of Texas-based Oil Company Buys Shares After Merger Completion

One member of Range Resources Corp. (NYSE:RRC)’s boardroom also bought a block of shares this week. Gregory G. Maxwell, who joined the company’s Board of Directors in September 2015, snatched up 1,000 shares at $37.00 apiece. Mr. Maxwell currently owns 12,211 shares.

The Texas-based independent natural gas, natural gas liquids and oil company focused on the Appalachian region has seen its market capitalization jump by 50% so far this year. Analysts at Morgan Stanley resumed coverage of Range Resources Corp. (NYSE:RRC) with an ‘Equal-Weight’ rating and a price target of $45 shortly after the Texas-based company completed the $4.2 billion-merger with Memorial Resource Development. Morgan Stanley anticipates Range Resources to extract greater value from freshly-acquired assets due to a solid track record of enhancing cost efficiency and improving well performance. Moreover, Morgan Stanley analysts “see significant upside if gas and NGL prices rebound, balanced by greater balance sheet risk than peers if commodity prices remain weak in 2017.” John Griffin’s Blue Ridge Capital added a 2.47 million-share position in Range Resources Corp. (NYSE:RRC) to its portfolio during the June quarter.

The final page of this article will discuss fresh insider selling at two other companies.

Several Insiders at Argan Offload Shares

A number of corporate insiders at Argan Inc. (NYSE:AGX) offloaded shares in the past several weeks, so let’s have a look at the “information-rich” set of insider selling only. Board member Henry A. Crumpton liquidated 20,000 shares on Monday at the price of $57.39 per share, cutting his overall holding 20,000 shares. James W. Quinn, another member of the company’s boardroom, discarded 10,000 shares on Friday for $57.08 each and 10,000 shares last Monday at $56.41 apiece. Following the recent sales, Mr. Quinn currently owns 79,570 shares.

The provider of engineering, other technical and consulting services to the power generation and renewable energy markets has seen its market value rise by 79% since the start of the year. Argan Inc. (NYSE:AGX)’s revenues for the three months that ended July 31 rose by 66.8% year-over-year to $162.5 million, while the company’s bottom line jumped by 74% year-on-year to $19.7 million. The number of hedge funds followed by Insider Monkey with equity stakes in Argan increased to 13 from 11 during the second quarter. The 13 asset managers amassed around 12% of the company’s total number of outstanding shares. David Brown’s Hawk Ridge Management owns approximately 320,000 shares of Argan Inc. (NYSE:AGX) as of June 30.

Executive and Board Member at Methode Electronics Sell Shares

Two insiders at Methode Electronics Inc. (NYSE:MEI) have been discarding shares over the past several trading sessions. To start with, Timothy R. Glandon, Vice President and General Manager of North American Operations, sold 23,825 shares on Friday at a price of $35.01 per share, 13,195 shares on Monday for $35.04 each and 2,163 shares on Tuesday at $35.04 apiece. After this series of transactions, Mr. Glandon currently owns 24,847 shares. Moreover, Board member Lawrence B. Skatoff liquidated 500 shares on Friday, 1,000 shares on Thursday and 2,000 on Wednesday at prices that fell in the range of $34.87 and $35.24 per share. The Board member currently owns 39,350 shares.

The stock of the global manufacturer of component and subsystem devices is 11% in the green this year. Methode Electronics Inc. (NYSE:MEI) posted net sales of $191.9 million for the three months that ended July 30, a decrease of 5.6% year-over-year. The decrease was mainly driven by lower net sales from the Automotive segment, reflecting lower sales volumes of transmission lead-frame assemblies and ignition and steering wheel switch products, as well as unfavorable exchange rate fluctuations. Royce & Associates, founded by Chuck Royce, owned 853,006 shares of Methode Electronics Inc. (NYSE:MEI) at the end of the April-June quarter.

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