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 two weeks.
CH Offshore (SGX: C13)
CH Offshore Limited owns and charters vessels to support and service the offshore oil and gas industry. CH Offshore operates a fleet of 15 vessels, 9 of which are wholly-owned Anchor-handling Tug/Supply (AHTS) vessels. The company also provides services such as seismic surveys, towing and anchor handling of drill rigs and equipment, and transportation of supplies and personnel.
On 2 May 2014, Mr John Cheak Boon Heng, a non-executive director of CH Offshore, acquired 200,000 shares at an average price of S$0.42 each via the open market. This transaction increased his stake in the company from 0.42% to 0.45%.
CH Offshore last traded at S$0.42 on Friday with no P/E ratio to speak off due to the huge losses made during June last year. Despite that, operations at the company seem to be still doing fine as the company offers an annualized distribution yield of 4.8%.
Megachem (SGX: 5DS)
Megachem is a specialty chemical solutions provider with a 49,000 square feet manufacturing facility. It has integrated operations that include the manufacture of proprietary chemicals and the international distribution of specialty chemicals. With a network of 11 distribution and warehousing points in 9 countries predominantly in Asia, Megaham carries over 1,000 different types and grades of specialty chemicals for various applications.
On 5 May 2014, Mr. Chew Choon Tee, who’s the chairman and managing director of the firm, bought 50,000 shares at an average price of S$0.30 each from the public market. Prior to the purchase, Chew already had control of slightly more than a third of the company. So while the new shares does increase his stake in the company, the increase is barely noticeable.
Megachem last changed hands at S$0.35 each and commands a P/E ratio of 18. It also sports a distribution yield of 2.9%.
Petra Foods (SGX: P34)
Initially known as a confectionary company with substantial interests in the supply of cocoa ingredients to third-party food & beverage manufacturers, Petra Foods has since divested its ingredients business to European chocolate maker Barry Callebaut on 30 June 2013.
As a result, it now focuses on its confectionary business. Supported by two chocolate manufacturing facilities in Indonesia and the Philippines, Petra’s portfolio of confectionary brands are leaders in their respective categories. Some of key markets include Indonesia, the Philippines, Singapore and Malaysia. Besides the manufacture of its own confectionary products, the group also distributes third party brands in Indonesia, Singapore and Malaysia, as a way of capitalizing on its existing distribution channels.
On 6 May, Aberdeen Asset Managers Limited notified the investing public that it had snapped up 230,000 shares for a sum of S$811,900 from the public market. That translates into an average purchase price of S$3.53 per share. The acquisition pushed Aberdeen’s 4.97% stake in Petra to more than 5%. At that level of ownership, Aberdeen is now considered a substantial shareholder of Petra. It must be noted however, that Aberdeen is not strictly an insider of the company; it’s just a shareholder with a large block of shares.
Shares of Petra are trading at S$3.76 currently and are valued at a high PE ratio of 37.5. The company also offers an annualized dividend yield of 1.4% as well.
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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.