Insiders Made Right Decision To Sell As Litian Pictures Holdings Dips 14%

Insiders at Litian Pictures Holdings Limited (HKG:9958) sold CN¥6.1m worth of stock at an average price of CN¥1.40 a share over the past year, making the most of their investment. After the stock price dropped 14% last week, the company's market value declined by HK$126m, but insiders were able to mitigate their losses.

While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, we do think it is perfectly logical to keep tabs on what insiders are doing.

See our latest analysis for Litian Pictures Holdings

Litian Pictures Holdings Insider Transactions Over The Last Year

Over the last year, we can see that the biggest insider sale was by the CFO, Joint Company Secretary & Executive Director, Jieyun Fu, for HK$6.1m worth of shares, at about HK$1.40 per share. That means that even when the share price was below the current price of HK$2.48, 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. However, while insider selling is sometimes discouraging, it's only a weak signal. This single sale was 100% of Jieyun Fu's stake. The only individual insider seller over the last year was Jieyun Fu.

The chart below shows insider transactions (by companies and individuals) over the last year. If you want to know exactly who sold, for how much, and when, simply click on the graph below!

I will like Litian Pictures Holdings better if I see some big insider buys. While we wait, check out this free list of undervalued and small cap stocks with considerable, recent, insider buying.

Insider Ownership Of Litian Pictures Holdings

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. We usually like to see fairly high levels of insider ownership. Litian Pictures Holdings insiders own 44% of the company, currently worth about HK$362m based on the recent share price. Most shareholders would be happy to see this sort of insider ownership, since it suggests that management incentives are well aligned with other shareholders.

So What Do The Litian Pictures Holdings Insider Transactions Indicate?

There haven't been any insider transactions in the last three months -- that doesn't mean much. It's heartening that insiders own plenty of stock, but we'd like to see more insider buying, since the last year of Litian Pictures Holdings 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 Litian Pictures Holdings has 2 warning signs and it would be unwise to ignore these.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, that have HIGH return on equity 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 of direct interests only, but not derivative transactions or indirect interests.

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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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com