One of the more commonly used strategies by investors is to follow insider transactions. Some might even assume that since insiders are “in the know”, they might be better equipped to predict the share price of a company. Consistent insider purchases may indicate an undervalued share price. On the other hand, there might be others who would turn the argument around and say that if insiders are selling, then bad news is likely to be around the corner – though it must be noted that there is no basis for that as insiders might be selling for…
One of the more commonly used strategies by investors is to follow insider transactions. Some might even assume that since insiders are “in the know”, they might be better equipped to predict the share price of a company.
Consistent insider purchases may indicate an undervalued share price. On the other hand, there might be others who would turn the argument around and say that if insiders are selling, then bad news is likely to be around the corner – though it must be noted that there is no basis for that as insiders might be selling for their own personal reasons.
With that in mind, let’s take a look at three companies with insider activity over the past week.
Broadway Industrial Group (SGX: B69)
Founded in 1969, Broadway Industrial is a manufacturer of precision-machined components and provider of engineered foam solutions. It boasts over 14 manufacturing and research facilities across China, Thailand and the USA.
It has two business divisions: foam plastics, and precision components. Under the former business division, it is a leading provider of eco-friendly foam solutions for packaging, insulation, automotive, medical and other applications, with a track record spanning more than 40 years. For the global hard disk drive (HDD) industry, the firm is one of the top three manufacturers of actuator arms and related assembled parts and counts the “big boys” such as Western Digital and Seagate as its major clients.
On April 7, a substantial shareholder, Delta Lloyd Asset Management NV acquired 184,000 shares for a total consideration of S$48,828 by purchasing shares on the open market. After the purchase, its deemed interest in the firm rose from 8.99% to 9.03%.
Broadway Industrial last traded at S$0.28 on Monday. Its P/E ratio stands at a lofty 67 and it’s not paying a dividend due to some difficult conditions it is facing. The last dividend payout was for S$0.01 in the financial year 2012.
Zhongmin Baihui Retail Group (SGX: 5SR)
Zhongmin Baihui Retail Group. is principally engaged in the ownership, operation, and management of department stores in China under the name “中闽百汇” (pronounced “Zhong Min Bai Hui”). With its very first store in 1997, the group has since expanded its footprint to include three self-owned stores and six managed stores in the Fujian and Jiangsu provinces of China. The retailer’s revenue is mainly derived from four sources: direct sales; commission from concessionaire sales; rental income; and income from managed rental.
While the company’s chief executive had bought some shares at the start of April, Lee Swee Keng, the executive chairman of Zhongmin Baihui, was the one buying this time round. On 7 April, Lee purchased 1.1 million shares at a price of S$1.75 each for a total sum of S$1.925 million. After the purchase, Lee’s direct interest in the firm rose from 21.47% to 22.03 %.
Zhongmin Baihui Retail last changed hands at S$1.76 on Monday and carries a really high P/E ratio of 175. It should be noted that 43.15% of the group is now jointly controlled by the group’s executive chairman and CEO.
Pacific Radiance (SGX: T8V)
Through the ownership of a young fleet of offshore vessels, Pacific Radiance provides subsea services, shipyard services, marine equipment as well as project logistics to the global oil and gas industry. The company is headquartered in Singapore and its customers predominantly operate on a regional or global basis.
As Pacific Radiance’s business model requires it to support its customers at wherever they have operations, the company has a global geographic reach and its vessels can be found mostly in high-growth markets, with a significant presence in Asia.
On 4 April, Goh Chong Theng, an independent director of the firm, purchased 30,000 shares for a total sum of S$33,000. With the acquisition, he now owns 80,000 shares of the company, equivalent to 0.011% of the total outstanding shares. Pacific Radiance closed at S$1.03 on Monday and it sells for 10.5 times earnings while offering an annualized dividend yield of 1.9%.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor James Yeo doesn’t own shares in any companies mentioned.