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 in mind, let’s take a look at two companies which have seen either insider or substantial shareholder activity over the past few weeks.
1. ARA Asset Management Limited (SGX: D1R)
Established in 2002, ARA Asset Management is a real estate fund management company which manages real estate investment trusts (REITs) as well as private real estate funds.
In addition, the company also provides corporate advisory and real estate management services.
On 2 April 2015, Franklin Templeton Institutional, an investment management firm, had purchased 2.336 million shares of ARA Asset Management at around S$1.61 each via the open market. In doing so, Franklin Templeton’s interest in the company increased from 6.75% to 7.03%.
ARA Asset Management’s shares last changed hands at S$1.64 on Tuesday. At that price, the company has a trailing price/earnings (P/E) ratio of 16 and a dividend yield of 3% (based on its dividend of S$0.05 per share in 2014).
2. Del Monte Pacific Ltd (SGX: D03)
Del Monte Pacific is an Asia-based fruits and vegetables processor that is particularly famous for its pineapples. To that point, the company runs the largest pineapple operation in southern Philippines.
The company also produces and distributes packaged products globally. In 2014, Del Monte Pacific had acquired the consumer food business of Del Monte Corporation for more than US$1.6 billion.
The purchase helped extend Del Monte Pacific’s geographical reach and also gave the company control over trademarks for consumer products such as Del Monte, S&W, Contadina, College Inn, Fruit Naturals, Orchard Select and SunFresh.
On 26th March 2015, Bluebell Group Holdings Limited (BGHL) had bought 2.67 million Del Monte Pacific shares at an estimated price of S$0.34 each. BGHL is wholly-owned by the trustee of Twin Palms Pacific Trust, a trust in which Joselito D Campos Jr and his family are beneficiaries of. D Campos Jr happens to be the chief executive of Del Monte Pacific.
With BGHL’s latest transaction, D Campos Jr’s stake in Del Monte Pacific had been bumped up from 67.154% to 67.291%.
Del Monte Pacific last traded at S$0.44 on Tuesday. The company is currently in the red and has no P/E ratio to speak of. In addition, no dividends were declared in its last financial year too.
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.