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….
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 managing 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 two companies that have had substantial shareholder activity over the past two weeks.
1. Cordlife Group Limited (SGX: P8A)
Cordlife Group Limited runs a cord blood bank where it provides a range of services including umbilical cord tissue banking and the collection, processing, testing, cryopreservation, and storage of umbilical cord blood at birth.
To facilitate the range of services that it provides and to be close to its customers, Cordlife owns and operates full processing and cryopreservation storage facilities across Asia. The company currently has operations in a number of Asian countries including Hong Kong, Singapore, India, and the Philippines. On top of that, Cordlife also a minority interest in China Cord Blood Corporation, one of the top cord blood banking outfits in China.
On 28 November, FIL Limited, a part of the giant asset management firm Fidelity and a substantial shareholder of Cordlife, purchased 256,000 shares at S$0.89 each via the open market. The transaction raised FIL’s stake in Cordlife from 8.97% to 9.06%
Cordlife’s shares last traded at S$0.915 on Wednesday. At this price, the company has a price/earnings (PE) ratio of 13.4 and a dividend yield of 2.2%.
2. Ezra Holdings Limited (SGX: 5DN)
Ezra Holdings is a “leading offshore contractor and provider of integrated offshore solutions” to the oil & gas industry. It has three business divisions, namely, Subsea Services, Offshore Support and Production Services, and Marine Services. In particular, the last division is actually accounted for by Ezra’s stake in Triyards Holdings Ltd (SGX; RC5) ; Triyards’ activities include “seabed-to-surface engineering, construction, marine and production services.”
On 28 November, Mondrian Investment Partners Limited, a value-oriented fund manager based in London and Philadelphia, sold 980,000 Ezra shares at an average price of S$0.668 each, reducing its stake in the firm from 8.01% to 7.91%. Ezra’s shares last changed hands at S$0.55 on Wednesday. The company is valued at 7.25 times its trailing earnings with a dividend yield of 0.91%.
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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.