Despite low prices, China Literature Limited (HKG:772) insiders sold CN¥282m worth of shares last year probably anticipating weakness

China Literature Limited's (HKG:772) stock price has dropped 3.6% in the previous week, but insiders who sold CN¥282m in stock over the past year have had less luck. Insiders would probably have been better off holding on to their shares given that the average selling price of CN¥58.03 is still lower than the current share price.

Although we don't think shareholders should simply follow insider transactions, we would consider it foolish to ignore insider transactions altogether.

View our latest analysis for China Literature

China Literature Insider Transactions Over The Last Year

In the last twelve months, the biggest single sale by an insider was when the insider, Wenhui Wu, sold HK$115m worth of shares at a price of HK$57.64 per share. That means that an insider was selling shares at slightly below the current price (HK$59.40). 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. While insider selling is not a positive sign, we can't be sure if it does mean insiders think the shares are fully valued, so it's only a weak sign. This single sale was just -41% of Wenhui Wu's stake.

China Literature insiders didn't buy any shares over the last year. You can see the insider transactions (by companies and individuals) over the last year depicted in the chart below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

Insider Ownership

I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with insiders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. It's great to see that China Literature insiders own 3.5% of the company, worth about HK$2.1b. I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.

So What Do The China Literature Insider Transactions Indicate?

The fact that there have been no China Literature insider transactions recently certainly doesn't bother us. It's heartening that insiders own plenty of stock, but we'd like to see more insider buying, since the last year of China Literature insider transactions don't fill us with confidence. So while it's helpful to know what insiders are doing in terms of buying or selling, it's also helpful to know the risks that a particular company is facing. While conducting our analysis, we found that China Literature has 1 warning sign and it would be unwise to ignore it.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.

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.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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