2 Companies with Insider and Substantial Shareholder Activity

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.

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 either substantial shareholder activity over the past two weeks.

1. Frencken Group Limited (SGX: E28)

Frencken is a global capital and consumer equipment service provider with operations in two segments: Mechatronics and Integrated Manufacturing Services (IMS).

The former provides a one-stop solution ( from product design and development, to final testing and assembly of modules and machines) for customers. Meanwhile, the latter sees Frencken offer integrated contract design and manufacturing services for businesses that are involved in sectors like automotive and office automation.

On 8 July 2015, Dennis Au, who took on the President role at Frencken on 5 May 2015, had bought 50,000 shares at around S$0.20 each. This purchase gives Au a 0.01% stake in Frencken.

With a closing price of S$0.205 on Wednesday, Frencken’s valued at 10 times its trailing earnings.

2. Venture Corporation Ltd (SGX: V03)

Venture had started life in 1984 as an electronics services provider. But over the years, it has steadily evolved.

Today, the firm’s a “leading global provider of technology services, products and solutions with established capabilities spanning marketing research, design and development, product and process engineering, design for manufacturability, supply chain management, as well as product refurbishment and technical support across a range of high-mix, high-value and complex products.”

On 15 July 2015, Pyrford International Ltd, a global asset management firm, had bought 92,000 shares of the company at a price of S$7.82 each. The purchase brought Pyrford’s stake in Venture up to 5.01%, which makes the former a substantial shareholder of the latter.

More than a week later on 24 July 2015, Aberdeen Asset Management Plc, another asset management outfit, had sold 309,000 shares of Venture at a price of S$8.02 apiece. The sale had pushed Aberdeen’s stake in Venture down by a little from 17.01% to 16.90%.

Venture had closed at S$7.89 on Wednesday. At that price, the technology services provider is valued at 15 times its trailing earnings.

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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.