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…
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 (shareholders who control 5% or more of a company) 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 these in mind, let’s take a look at three companies with substantial shareholder activity over the past two weeks.
1. ISDN Holdings Limited (SGX: I07)
Founded in 1987 as a small motor trading and sales company, the company has since become a mini-conglomerate of sorts with interests in energy, hi-tech agriculture, and motion control technology. More specifically, ISDN Holdings provides integrated engineering solutions and services in over 10 different fields like pharmaceuticals, oil and gas, intelligent robots, factory automation, and water treatment etc.
Currently, it serves more than 5,000 customers through its 61 subsidiaries and joint ventures across 93 offices worldwide.
On 29 July 2014, Mr. Tan Thiam Chye, a substantial shareholder of the firm, scooped up 400,000 shares. The purchase effectively increased his stake in the company from 9.03% to 10.14%.
ISDN Holdings’ shares are exchanging hands at S$0.395 at the moment. This gives the company a trailing PE (price/earnings) ratio of 35 and a dividend yield of 1.0%.
2. Manhattan Resources Limited (SGX: L02)
Manhattan Resources provides logistics and other support services to the coal mining and oil and gas industries in Indonesia through its subsidiaries and joint ventures. Its operations lie mainly in ship chartering and provision of freight services primarily for coal carrying activities, and the leasing of mining equipment and machinery.
Just three months ago on 22 May, Manhattan Resources also announced that it will be purchasing Singxin Resources for S$1 billion. The company highlights that this will probably be its next growth-catalyst as the purchase would see it securing the rights to mine minerals such as chrome, serpentine, and magnesia in the Xinjiang autonomous region of China.
On 4 occasions from 16 to 24 July 2014, Mohamed Abdul Jaleel, a substantial shareholder of the firm, snapped up a total of 560,000 shares on the open market at an average price of S$0.418 each. The purchases brought his stake in the firm from 7.99% to 8.10%.
Manhattan Resources’ shares are trading at S$0.390 each currently and are valued at more than 83 times its trailing earnings.
3. Spackman Entertainment Group Ltd (SGX: 40E)
Spackman Entertainment Group is a new share in Singapore’s market given that it had only begun trading on the Catalist exchange on 22 July 2014. With a listing price of S$0.26, the company has been really popular with investors as it’s now some 79% higher at S$0.465.
Spackman Entertainment Group’s primary business is in the independent development, production, presentation, and financing of theatrical motion pictures in Korea. Some of the movies in the company’s stable include Cold Eyes, All About My Wife, and Snowpiercer; the trio are all amongst the top 10 grossing Korean films for 2012 and 2013.
In addition, the company also invests in other entities involved in the entertainment industry: It has a café-lounge called Upper West; and it also produces documentary programmes for broadcast and cable television.
On 22 July 2014, Havenport Asset Management acquired 4.1 million shares of the firm on the open market for a total sum of S$1.5 million. As a result, its stake in the company rose from 4.05% to 5.08%.
At Spackman Entertainment Group’s current price, it’s valued at a lofty price/earnings (PE) ratio of 47.
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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.