One of the more commonly used strategies by investors is to follow insider transactions. That’s something even the legendary super investor Peter Lynch did.
In his book One Up on Wall Street, Lynch shared investing checklists that he had used and one of the criterion was this: “Whether insiders are buying and whether the company itself is buying back its own shares. Both are positive signs.”
Consistent insider purchases may indicate that a company’s management thinks that the stock is undervalued. They could be wrong of course, but companies that have seen insiders buy shares consistently are still worth some further research.
Meanwhile, it’s worth noting that insider selling need not mean that bad news about the company is around the corner – there are many reasons why insiders may want to sell.
With these in mind, let’s take a look at two companies that have recently seen insiders buying shares, or in other words, putting money where their mouth is.
1. GL Ltd (SGX: B16)
GL, which was previously known as GuocoLeisure, could be seen as a conglomerate given its business interests in diverse areas such as hotel management & operations, gaming, oil & gas, and property development, among others.
While the company may not be a household name in Singapore, it has a significant presence in London as the largest hotel owner-operator in the European city, with over 5,000 rooms and 17 hotels under its care.
In the month of January, Mr. Quek Leng Chan, GL’s non-executive chairman, had been busy picking up shares of the company. As of 28 January 2016 (the last day Quek had bought shares in the company in the month), he had bought some 6.374 million shares of the company for a total sum of around S$5.37 million. All the purchases in January had caused Quek’s stake in GL to climb from 66.87% to 67.34%.
At GL’s current share price of S$0.875, it has a price-to-book ratio of just 0.7.
2. Keppel REIT (SGX: K71U)
Keppel REIT is an owner of nine office assets in Singapore and Australia. At the local front, the REIT has stakes in commercial properties such as Ocean Financial Centre, Marina Bay Financial Centre, One Raffles Quay, and Bugis Junction Towers.
On 19 January 2016, Mr. Ang Wee Gee, a non-executive director of Keppel REIT’s manager, had snapped up 200,000 shares of the REIT for S$0.885 each. The transaction had bumped up Ang’s interest in the firm slightly from 0.0246% to 0.0275%.
The following day on 20 January, Dr. Chin Wei-Li, the chairman and non-executive independent director of Keppel REIT’s manager, had made some purchases herself. Dr. Chin had bought a total of 500,000 units of the REIT for roughly S$450,000. As a result, her total interest in the firm had climbed from 0.0445% to 0.0601%.
The units of Keppel REIT are valued at just 0.6 times their book value at their current price of S$0.91 each.
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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.