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2 Companies with Insiders Eating More of Their Own Cooking

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 as a backdrop, let’s take a look at two companies that have recently seen insiders buy up shares, or in other words, eating more of their own cooking.

1. Miyoshi Ltd (SGX: M03)

Founded in 1987, Miyoshi is an integrated engineering outfit that has manufacturing plants across Asia. The firm offers a one-stop service package that ranges from tool design to final assembly operations.

Currently, Miyoshi’s customers come mainly from three industries: Data Storage, Consumer Electronics, and Automotive.

On 5 May, Andrew Sin, the chief executive of Miyoshi, had bought 1.003 million shares of the firm for roughly 6.6 Singapore cents each. As a result,of the purchase, Sin’s stake in Miyoshi (including his direct as well as indirect holdings) had increased slightly from 30.79% to 31.01%.

Miyoshi’s shares last changed hands at S$0.053 on Wednesday. The company had made losses over the past year and did not pay out any dividends.

2. Serial System Ltd (SGX: S69)

Serial System is a distributor of electronic components with a large customer base of more than 6,000 organisations across many different industries. Some of its more well-known customers include Toshiba, Fujitsu, and Sharp.

The firm also has “one of the largest distribution networks in Asia, with fifty-eight offices and ten warehouses” located in the Asia Pacific region.

Over the past two weeks, Goh Bak Heng, the founder and current executive chairman and chief executive of Serial System,  had acquired a total of 265,000 TDRs (TDRs are Taiwan Depository Receipts; 1 TDR of Serial System is equivalent to 3 shares). The buying started in 5 May and had occurred at a narrow price range of S$0.180 and S$0.181. The transactions had collectively raised Goh’s stake in Serial Systems slightly from 38.94% to 39.02%.

Based on its closing price of S$0.179 on Wednesday, Serial System is trading at just 8 times its trailing earnings and sports a dividend yield of 5.9% (thanks to its annual dividend of S$0.0105 per share in 2014).

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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.