Have Insiders Been Selling China Literature Limited (HKG:772) Shares?

We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. Unfortunately, there are also plenty of examples of share prices declining precipitously after insiders have sold shares. So we'll take a look at whether insiders have been buying or selling shares in China Literature Limited (HKG:772).

What Is Insider Buying?

Most investors know that it is quite permissible for company leaders, such as directors of the board, to buy and sell stock in the company. However, most countries require that the company discloses such transactions to the market.

We don't think shareholders should simply follow insider transactions. But it is perfectly logical to keep tabs on what insiders are doing. 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'.

Check out our latest analysis for China Literature

The Last 12 Months Of Insider Transactions At China Literature

The Vice Chairman, Wenhui Wu, made the biggest insider sale in the last 12 months. That single transaction was for HK$455m worth of shares at a price of HK$45.50 each. That means that even when the share price was below the current price of HK$55.85, an insider wanted to cash in some shares. 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. Please do note, however, that sellers may have a variety of reasons for selling, so we don't know for sure what they think of the stock price. It is worth noting that this sale was only 37% of Wenhui Wu's holding. Wenhui Wu was the only individual insider to sell shares in the last twelve months.

Over the last year, we can see that insiders have bought 1.20m shares worth HK$56m. But insiders sold 22.00m shares worth HK$1.2b. Wenhui Wu sold a total of 22.00m shares over the year at an average price of CN¥52.35. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. If you click on the chart, you can see all the individual transactions, including the share price, individual, and the date!

I will like China Literature better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

Does China Literature Boast High Insider Ownership?

Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. We usually like to see fairly high levels of insider ownership. China Literature insiders own about HK$2.4b worth of shares (which is 4.0% of the company). This kind of significant ownership by insiders does generally increase the chance that the company is run in the interest of all 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. 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.

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.

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