We often see insiders buying up shares in companies that perform well over the long term. 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 Cinemark Holdings, Inc. (NYSE:CNK).
Do Insider Transactions Matter?
It's quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, rules govern insider transactions, and certain disclosures are required.
Insider transactions are not the most important thing when it comes to long-term investing. But it is perfectly logical to keep tabs on what insiders are doing. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year'.
The Last 12 Months Of Insider Transactions At Cinemark Holdings
The President of Cinemark International LLC, Valmir Fernandes, made the biggest insider sale in the last 12 months. That single transaction was for US$300k worth of shares at a price of US$24.98 each. We generally don't like to see insider selling, but the lower the sale price, the more it concerns us. It's of some comfort that this sale was conducted at a price well above the current share price, which is US$16.65. So it may not tell us anything about how insiders feel about the current share price.
Cinemark Holdings insiders didn't buy any shares over the last year. You can see a visual depiction of insider transactions (by companies and individuals) over the last 12 months, below. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
I will like Cinemark Holdings better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Another way to test the alignment between the leaders of a company and other shareholders is to look at how many shares they own. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. Cinemark Holdings insiders own about US$225m worth of shares (which is 12% 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 Cinemark Holdings Insider Transactions Indicate?
It doesn't really mean much that no insider has traded Cinemark Holdings shares in the last quarter. It's heartening that insiders own plenty of stock, but we'd like to see more insider buying, since the last year of Cinemark Holdings insider transactions don't fill us with confidence. So these insider transactions can help us build a thesis about the stock, but it's also worthwhile knowing the risks facing this company. Our analysis shows 2 warning signs for Cinemark Holdings (1 is a bit unpleasant!) and we strongly recommend you look at them before investing.
Of course Cinemark Holdings may not be the best stock to buy. So you may wish to see this free collection of high quality 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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