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2 Companies with Insiders Putting More Money Where Their Mouth Is

Credit: reynermedia

One of the more commonly used strategies by investors is to follow insider transactions. That’s something even the legendary super investor Peter Lynch does.

In his book One Up on Wall Street, Lynch shared investing checklists that he had used and one of the criterion was “Whether insiders are buying and whether the company itself is buying back its own shares. Both are positive signs.”

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 that have recently seen insiders buying shares, or in other words, putting more money where their mouth is.

1. Hafary Holdings Ltd (SGX: 5VS)

Hafary Holdings is a flooring materials specialist with over 3,000 products, sourced globally, in its catalog. The company serves a wide spectrum of customers, ranging from homeowners to interior designers and even developers.

On 23 November 2015, Low Kok Ann, Hafary’s executive chairman and chief executive, had snapped up 233,200 shares of the firm for around S$0.19 each. With the purchase, Low’s stake in the company had been bumped up from 8.13% to 8.18%.

Hafary Holdings closed at S$0.19 yesterday. At that price, it’s valued at just 6 times its trailing earnings.

2. Viva Industrial Trust (SGX: T8B)

As its name suggests, Viva Industrial Trust is a stapled trust that has a focus on investing in business parks and industrial real estate.

On 24 November 2015, the trust had purchased two industrial properties in Singapore to bring its total real estate count to seven. If the two new properties are excluded, Viva Industrial Trust’s remaining five properties, which are also all located in Singapore, have a total value of S$962 million and a collective net lettable area of 2.34 million square feet.

On 23 November 2015, Wilson Ang Poh Seong, the chief executive and executive director of Viva Industrial Trust’s Managers, had bought 50,000 of the trust’s stapled securities at S$0.73 each. The transaction had pushed up Ang’s stake in Viva Industrial Trust slightly from 0.14% to 0.15%.

At their closing price of S$0.72 yesterday, the stapled securities of Viva Industrial Trust have a price-to-book ratio of just 0.86.

A Fool’s take

Companies or trusts with insider-buying are just a good starting point for investors who are looking for opportunities. It will be the investor’s job to dig further and determine for himself whether those shares are actually cheap or not.

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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.