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.
In addition, while substantial shareholders are often not involved with running the company and are thus not strictly classified as ‘insiders’, their moves with a company’s shares might be worth noting too for the simple reason that substantial shareholders have a big stake in a company and would likely have done the requisite homework.
With that in mind, let’s take a look at three companies with both insider and substantial shareholder activity over the past two weeks.
1. Falcon Energy (SGX: 5FL)
Falcon Energy is an integrated marine services group that provides a full spectrum of support services for the offshore marine and oil & gas sectors. The company has more than 30 years of history and counts well-known oil & gas outfits like Shell, ExxonMobil, and BP as its clients. Interestingly, Falcon Energy has a 29% interest in Singapore-listed CH Offshore (SGX: C13), an owner and operator of anchor handling tug supply (AHTS) vessels.
On 28 May 2014, Mr. Neo Chin Lee, Chief Operating Officer of the firm, purchased 500,000 shares at a price of S$0.39 each via the open market. The purchase works out to a total of S$195,000 and increases his stake in the company from 1.46% to 1.53%. Falcon Energy last traded at S$0.39 on Wednesday with a modest P/E (price/earnings) ratio of 4 and an annualized dividend yield of 2.6%.
2. Progen Holdings (SGX: 583)
Progen Holdings started its corporate life in 1981 as a supplier and installer of air-conditioning and mechanical ventilation systems. Today, it has interests in trading and contracting engineering works and cooling towers in addition to its initial bread-and-butter.
On two separate occasions on 27 May and 2 June 2014, Mr. Lee Ee, chairman and managing director of the company, had acquired a combined 2.379 million shares at S$0.159 per share. After the purchase, his stake in the firm rose from 22.08% to 22.96%. Progen Holdings last changed hands at S$0.159 on Wednesday. At that price, shares of the company command a P/E ratio of 20. There’s no dividend yield to speak of as the company has not paid out a dividend over the past year.
3. Venture Corporation Limited (SGX: V03)
Founded in 1984, Venture Corp has become a leading global provider of technology services, products and solutions. It designs and develops electronic and mechanical solutions for supply chain management and other manufacturers. The company also possess technological know-how and intellectual property in other domains such as printing and imaging, advanced storage systems, and medical devices, just to name a few.
After its previous purchase of 258,000 shares on 24 April 2014, Aberdeen Asset Management had to sell off a total of 4.13 million shares from all its related funds on 7 May 2014. The sale was made to meet withdrawal of capital from one of Aberdeen’s clients.
Shortly after the sale, Aberdeen then rebought 1.283 million shares of Venture Corporation on 23 May 2014 for S$7.20 per share, or S$9.24 million in total. With the transaction, Aberdeen is once again a substantial shareholder of Venture Corporation with a 22.07% stake.
Venture Corporation closed at S$7.37 on Wednesday. It’s valued at 15 times trailing earnings at that price and an annualized dividend yield of 6.8%.
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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.