2 Companies with Management Putting Their Money Where Their Mouth Is

Credit: reynermedia

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. It must be noted though that there is no basis for that as insiders might be selling for their own personal reasons.

With these in mind, let’s take a look at two companies that have recently seen insiders buying even more shares, or in other words, putting even more money where their mouth is.

1. CWT Ltd (SGX: C14)

CWT is a provider of integrated logistics services and supply chain solutions and has operations spanning 90 countries.

The company, which has over 12 million square feet of warehouse space around the globe, has four business segments namely logistics, commodity marketing, engineering services, and financial services.

The logistics segment represents the core of CWT’s business, contributing 58% of the firm’s total profit in 2014.

Over two days on 23 and 24 February 2015, Loi Kai Meng, CWT’s Chairman, had bought a total of 2 million shares for around S$1.62 each. The purchases had increased his stake in the firm from 48.925% to 49.258%.

CWT’s shares closed on Friday at S$1.525 and carried a trailing P/E (price to earnings) ratio of 8.1. Based on that share price and its dividend of 4 Singapore cents per share for 2014, CWT’s dividend yield is 2.6% at the moment.

2. Challenger Technologies Limited  (SGX: 573)

Established in 1984, Challenger Technologies has over the years made a name for itself in Singapore as a reliable retailer of IT products and a provider of related services.

The company currently has more than 40 stores across Singapore and Malaysia; these stores are of various formats including Superstores, mini-stores, and Valore and Musica concept stores. In addition, Challenger Technologies also has a membership scheme for its retail stores and currently has more than 500,000 members in Singapore.

On two separate occasions on 26 February 2015 and 2 March 2015, Ong Sock Hwee, wife of Challenger Technologies’ chief executive Loo Leong Thye, had purchased a total of 501,200 shares for a sum of S$261,596. The transactions had helped push up Ong’s direct ownership in the firm from 9.542% to 9.69%.

As a result of Ong’s purchases, Loo had also in a way, bought even more shares in his company. With his wife’s recently-bought shares, Loo’s overall stake in Challenger Technologies (comprising his own personal holdings as well as that of his wife) had increased from 53.275% to 53.421%.

Challenger Technologies’ shares last changed hands at S$0.525 on Friday.  At that price, the company trades at 12.3 times its trailing earnings and has a trailing-12-month dividend yield of 4.48%.

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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 owns shares in CWT Ltd.