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 which have seen either insider or substantial shareholder activity over the past weeks.
1) Sitra Holdings (International) Ltd (SGX: 5LE)
Headquartered in Singapore, Sitra is an international distributor of high quality wood-based products and premium lifestyle outdoor furniture under its Comica, decKING, and Pacific brands. The company’s offerings include decking, flooring, fencing, door and window mold, as well as outdoor garden furniture, garden accessories, and contract furnishings..
On 19 January 2015, Chew Ah Ba’s spouse, Tan Teresa, had purchased200,000 shares at $0.016 each from the open market. Chew’s the Executive Chairman and CEO of Sitra, and his wife’s purchase had helped to bump up his indirect interest in the firm from 11.39% to 11.42% (this deemed interest consists entirely of Tan’s stake in Sitra). Chew himself also owns 16.03% of Sitra.
The same day also saw Chew Chiew Siang Steven, Deputy CEO of Sitra, snap up 109,000 shares of the company at S$0.015 each. Chiew’s stake in Sitra increased from 3.07% to 3.09% as a result.
Sitra’s shares closed at S$0.017 on Friday. At that price, it has an undemanding price-to-earnings (PE) ratio of 5.9 based on its earnings over the last 12 months.
2) Technics Oil & Gas Limited (SGX: 5CQ)
Founded in 1990, Technics Oil & Gas is a specialist engineering service provider for the exploration and production (E&P) segment of the oil & gas industry. With its yards located in Singapore, Vietnam, and Indonesia, the company is able to take on multi-disciplined projects involving compression systems and process modules for its oil & gas customers.
The company has 350 full-time employees, including an in-house design and engineering team, and it has a presence in multiple continents (Technics Oil & Gas has business operations in countries like China, Germany, the Sultanate of Oman, and the United States).
On 12 January 2015, Lee Tock Kiau bought 739,000 shares of the firm at S$0.677 each. The purchase increased his stake in Technics Oil & Gas slightly from 7% to 7.316%. Lee had become a substantial shareholder of the company on 11 August 2014 after he acquired an initial 13.964 million shares via an off-market transfer at an undisclosed price.
Technics Oil & Gas’ shares closed at S$0.69 on Friday. It has no P/E ratio to speak of as it has been making losses over the last 12 months. No dividends were paid in its last-completed financial year too.
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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.