We often see insiders buying up shares in companies that perform well over the long term. The flip side of that is that there are more than a few examples of insiders dumping stock prior to a period of weak performance. So we'll take a look at whether insiders have been buying or selling shares in Adobe Inc. (NASDAQ:ADBE).
What Is Insider Selling?
It is perfectly legal for company insiders, including board members, to buy and sell stock in a company. However, such insiders must disclose their trading activities, and not trade on inside information.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But logic dictates you should pay some attention to whether insiders are buying or selling shares. For example, a Columbia University study found that 'insiders are more likely to engage in open market purchases of their own company’s stock when the firm is about to reveal new agreements with customers and suppliers'.
The Last 12 Months Of Insider Transactions At Adobe
In the last twelve months, the biggest single sale by an insider was when the Executive VP & General Manager of Digital Media, Bryan Lamkin, sold US$8.3m worth of shares at a price of US$239 per share. That means that an insider was selling shares at slightly below the current price (US$278). When an insider sells below the current price, it suggests that they considered that lower price to be fair. That makes us wonder what they think of the (higher) recent valuation. However, while insider selling is sometimes discouraging, it's only a weak signal. It is worth noting that this sale was only 36% of Bryan Lamkin's holding.
In total, Adobe insiders sold more than they bought over the last year. You can see a visual depiction of insider transactions (by individuals) over the last 12 months, below. By clicking on the graph below, you can see the precise details of each insider transaction!
I will like Adobe better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Adobe Insiders Are Selling The Stock
The last quarter saw substantial insider selling of Adobe shares. In total, insider Dana Rao dumped US$859k worth of shares in that time, and we didn't record any purchases whatsoever. In light of this it's hard to argue that all the insiders think that the shares are a bargain.
Insider Ownership of Adobe
Looking at the total insider shareholdings in a company can help to inform your view of whether they are well aligned with common shareholders. I reckon it's a good sign if insiders own a significant number of shares in the company. It's great to see that Adobe insiders own 0.3% of the company, worth about US$412m. Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.
What Might The Insider Transactions At Adobe Tell Us?
An insider sold stock recently, but they haven't been buying. Despite some insider buying, the longer term picture doesn't make us feel much more positive. But it is good to see that Adobe is growing earnings. The company boasts high insider ownership, but we're a little hesitant, given the history of share sales. If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.
But note: Adobe may not be the best stock to buy. So take a peek at this free list of interesting companies with high ROE and low debt.
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.
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