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. Though, it must be noted 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. Though, it must be noted 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 with insiders buying shares, or in other words, putting their money where their mouth is.
1. Bonvests Holdings Ltd (SGX:B28)
Bonvests may not be a familiar name, but it has had a long history, having been founded in 1982. The company currently has three core businesses, namely, property development and investment, management and ownership of hotels, and the management of waste and cleaning of buildings.
The company’s real estate portfolio include Liat Towers. As for the hospitality side of things, Bonvests counts the Sheraton Towers Singapore Hotel under its wings, along with a collection of luxury resorts located in exotic locations like Tunisia, Mauritius, Zanzibar, and the Maldives.
Meanwhile, Bonvests’ waste management business comes from its four-fifths stake in Catalist-listed Colex Holdings Limited (SGX: 567), one of Singapore’s leading waste management and contract cleaning companies.
Henry Ngo, Bonvests’ chairman and managing director, had bought shares of the company on a number of occasions since 18 September 2015. All told, Ngo had snapped up 454,500 shares at a price of between S$1.19 and S$1.209 each. The series of transactions had increased Mr. Ngo’s total stake in Bonvests Holdings slightly from 82.48% to 82.59%.
At Bonvests’ closing price of S$1.24 yesterday, the company’s valued at just 0.6 times its latest tangible book value.
2. Trek 2000 International Ltd (SGX:5AB)
The thumbdrive is by now a ubiquitous portable memory-storage device for computers that most people in Singapore (and around the world) would likely have used before. But, do you know that it’s a Singapore invention? The company behind that tiny but useful device is Singapore-based Trek 2000.
Trek 2000 has continued to innovate over the years, having a patent library of nearly 440 patents and creating new produts such as the Flucard in 2010. The Flucard is a Wi-Fi SD card that can be plugged into any device with a SD card slot; said device will then gain Wi-Fi functionality with the introduction of the Flucard.
On 29 September 2015, Henn Tan, chairman and chief executive of Trek 2000, had bought 42,000 shares of the firm for around S$12,800 in total. It’s a tiny purchase, which brought Tan’s stake in Trek 2000 up very slightly from 31.14% to 31.15%. Interestingly, Trek 2000 has also been engaged in aggressive share buybacks since the end of August 2015.
Shares of Trek 2000 last changed hands at S$0.30 yesterday, after falling by 42% from a 52-week high of S$0.52. At a price of S$0.30, Trek 2000’s valued at 19 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.