Why Insiders Are Dumping Costco Wholesale, Ross Stores Inc., and Synopsys Inc. (SNPS)

It is highly likely that the recovery rally of the Dow Jones Industrial Average and other major U.S. indexes will take a breather this Tuesday, as there is mounting evidence that China’s economy is slowing down indeed. As stated by the General Administration of Customs, China’s exports dropped 3.7% year-over-year in September, while its imports declined 20.4%. Meanwhile, the International Monetary Fund anticipates that the global economic growth will reach 3.1% this year, which represents the lowest growth rate since the financial crisis. Unquestionably, the growing concerns about China’s economic slowdown will put some weight on most U.S. equities as well. In the meantime, some corporate insiders have started to reduce their holdings, which may also serve as a bearish sign on their companies’ stock. The Insider Monkey team pinpointed three companies that saw their insiders sell stock recently, so we will closely examine each company’s insider selling activity in order to find out what might have propelled these insiders to jettison shares. The companies in question are represented by Costco Wholesale Corporation (NASDAQ:COST), Ross Stores Inc. (NASDAQ:ROST), and Synopsys Inc. (NASDAQ:SNPS).

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Richard A. Galanti, who has been a part of Costco Wholesale Corporation (NASDAQ:COST) since the company’s beginning in 1980s, reported selling 5,500 shares through multiple transactions at sale prices ranging from $152.69 to $153.70. He also reported offering 1,000 shares as a gift. After these transactions, the Executive Vice President and Chief Financial Officer owns 40,446 shares, along with an additional 7,000 shares held indirectly via North Island Holdings LLC. Just a few days ago, Costco reported net sales of $10.75 billion for September, which marks an increase of 2% year-over-year. Furthermore, some analysts are confident that the company’s same-store sales figures will keep increasing in the months ahead despite operating in a competitive and challenging retail environment. The shares of the retailer have advanced by more than 8% since the beginning of the year despite being caught in the recent broader market sell-off. To sum up, it is hard to stipulate what might have guided the executive to sell shares, but the fact that the stock is currently trading relatively close to its all-time high might serve as an explanation. Warren Buffett’s Berkshire Hathaway represents the largest shareholder of Costco Wholesale Corporation (NASDAQ:COST) among the hedge funds tracked by our team with 4.33 million shares.

Let’s now move on to Ross Stores Inc. (NASDAQ:ROST), which has seen high insider selling activity over the past month or so. CEO Barbara Rentler, who took the reins of the company in June 2014, reported selling 42,574 shares last week at prices of $48.24 and $48.30 per share. As a result, she currently holds a stake of 560,748 shares. Earlier this week, Ross Stores announced the opening of 19 Ross Dress for Less and seven dd’s DISCOUNTS stores in September and October, which are set to finalize the company’s expansion plan for 2015. The whole expansion plan included 90 stores, 70 of which represent Ross locations. It is also worth pointing out that Ross Stores made Goldman Sachs Group Inc. (NYSE:GS)’s top ten quality stocks list, which suggests that the stock might outperform the broader market during the first three-month period after a potential rate hike (read more details here). However, the stock has delivered a good performance even in a low interest rate environment, gaining 7% year-to-date. Jim Simons’ Renaissance Technologies added a 624,428-share position in Ross Stores Inc. (NASDAQ:ROST) during the June quarter.

Lastly, we will look into the insider selling activity at Synopsys Inc. (NASDAQ:SNPS). Joseph W. Logan, Executive Vice President, Worldwide Sales and Corporate Marketing, unloaded 3,674 shares at a weighted average price of $47.61, trimming his stake to 64,839 shares. Roughly two months ago, Synopsys posted its earnings report for the third quarter of fiscal 2015 that ended July 31. The company posted revenue of $555.8 million and GAAP net income of $0.35 per share, compared to $521.8 million and $0.42 per share reported a year ago. However, Synopsys anticipates even stronger revenues for the fourth quarter, which are expected to be in the range of $570 million-to-$585 million. Similarly, the company expects GAAP earnings per share between $0.31 and $0.38. It will not take long until the market gets the chance to examine the company’s financial figures for the fourth quarter, so the executive’s decision to sell shares might be somewhat related to the upcoming earnings report. Meanwhile, the shares of Synopsys have gained slightly more than 10% since the start of the year. Cliff Asness’ AQR Capital Management is among the largest stockholders of Synopsys Inc. (NASDAQ:SNPS) within our database, holding approximately 836,000 shares.

Disclosure: None