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….
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.
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 as a backdrop, let’s take a look at two companies that have seen substantial shareholder activity over the past two weeks.
1. Keppel Corporation Limited (SGX: BN4)
Founded in 1968, Keppel Corp is today one of Singapore’s largest companies. It has four main business divisions: Offshore & Marine; Real Estate; Infrastructure; and Investments.
For the Offshore and Marine division, it is a global leader in rig design and building, as well as specialised shipbuilding. Keppel Corp’s real estate operation sees it developing (and sometimes owning) residential properties, integrated townships, and investment-grade commercial properties.
Moving on to the infrastructure arm, this is where Keppel Corp houses its interests in utility power plants, waste management facilities, logistics services providers, and data centers. Keppel DC REIT (SGX: AJBU), which only got listed last December, is part of Keppel Corp’s infrastructure arm.
Last but not least, Keppel Corp owns stakes in other companies under its Investment division. These other companies include investment firm K1 Ventures (SGX: K01), telecommunications outfit M1 Ltd (SGX: B2F), and oil and gas explorer KrisEnergy Holdings Ltd (SGX: SK3).
On 26 March 2015, Aberdeen Asset Management Asia Limited, a substantial shareholder of Keppel Corp, bought 2.2 million shares for a total of S$19.82 million via the open market. The purchase had helped to push up Aberdeen’s stake in Keppel Corp from 6.93% to 7.05%.
Keppel Corp’s shares last changed hands at S$9.08 on Tuesday. At that price, the company has a price/earnings (PE) ratio of 8.7 and a dividend yield of 5.3%.
2. Sino Grandness Food Industry Group Ltd (SGX: T4B)
Founded in 1997 and headquartered in Shenzhen, China, Sino Grandness produces and sells canned vegetables and fruits in Europe, North America, and Asia. In 2010, the company moved beyond that and launched its own bottled fruit and vegetable juice products under the Garden Fresh brand.
Based on Sino Grandness’ own account, it is now one of the leading exporters of canned asparagus, long beans, and mushrooms in China. Apparently, the company also counts international supermarket retailers such as Carrefour, Coles, and Auchan as its primary customers.
On 24 March and 26 March 2015, Chalermchai Mahagitsiri, a recently appointed director of Sino Grandness, had been involved with a number of purchases of the company’s shares which saw a total of 1.59 million shares being bought for a collective sum of S$456,850.
The buys were actually made by Soleado Holdings Pte Ltd., itself a substantial shareholder of Sino Grandness. Soleado, in which Mahagitsiri has an interest in, saw its stake in Sino Grandness get bumped up from 9% to 9.236% as a result of the transactions.
Meanwhile, Mahagitsiri’s deemed interest in Sino Grandness had stepped up from 12.77% to 13.0% as a result of Soleado’s purchases.
At Sino Grandness’s last traded price of S$0.34 on Tuesday, the shares have a really low PE ratio of just 1.91.
To learn more about investing and to keep up to date on the latest financial and stock market news, sign up for a FREE subscription to The Motley Fool's weekly investing newsletter, Take Stock Singapore. Also, like us on Facebook to follow our latest hot articles.
The Motley Fool's purpose is to help the world invest, better.
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.