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…
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 both insider and/or substantial shareholder activity over the past two weeks.
1) City Developments Limited (SGX: C09)
City Developments is the second largest listed property developer in Singapore with real estate interests around the globe. It operates in three main segments: Property Development; Hotel Operations; and Rental Properties.
Established since 1963, the company has grown to own an extensive network of more than 400 subsidiaries and associated companies. That network now spans 88 locations across 25 countries, in regions such as Asia, Europe, the Middle East, North America, New Zealand, and Australia.
On 29 August 2014, Aberdeen Asset Managers Limited, a substantial shareholder of City Developments, bought 173,000 shares for a total amount of S$1.738 million. Through this transaction, Aberdeen Asset Managers’ stake in the company went up very slightly from 12.99% to 13.01%.
The company last traded at S$9.86 with a P/E ratio of 15 and a mediocre dividend yield of 0.81%.
2) GRP Ltd (SGX: G18)
GRP’s main activities can be categorized into 3 segments: 1) GRP Hose & Marine Specialists; 2) Measuring Instruments/Metrology; and 3) GRP China’s uPVC Pipes & Fittings.
The Hose and Marine segment operates predominantly in Singapore where it manufactures high quality hoses and fittings for the marine, oil, and industrial sectors. As for the uPVC Pipes & Fittings segment, it provides (as its name suggests) uPVC pipes and related fittings; the segment is mainly active in China.
On 2 occasions in 2 September and 3 September 2014, Kwan Chee Seng, a substantial shareholder and Director of the company, scooped up 7.369 million shares in total for a sum of S$788,728. As a result of the purchases, his interest in the firm had grown from 28.34% to 29.6%.
GRP last changed hands at S$0.11 which represents a trailing price-to-earnings ratio of 18. Interestingly, the firm actually carries a juicy dividend yield of 9%.
3) Petra Foods Limited (SGX: P34)
Petra Foods was one of the world’s major manufacturers and suppliers of cocoa ingredients before it sold that part of its business to Swiss bulk chocolate producer Barry Callebaut for a whopping US$950 million.
After the sale of its cocoa ingredients segment, its focus is now on the marketing and distribution of chocolate confectionery products. The company, one of the largest food-related shares in Singapore in terms of market value, owns a portfolio of brands. Some of these brands, such as Top, Silver Queen, and Delfi¸ are actually leaders in their respective categories in South East Asia.
On 26 August 2013, Aberdeen Asset Management Asia Limited bought 150,000 shares for a total sum of S$590,240. The purchase has notched up the substantial shaareholder’s stake in the firm from 8.99% to 9.02%.
Petra Foods last sold at S$3.77 per share with a lofty P/E ratio of 32 and dividend yield of 1.27%.
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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.