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 criteria 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.
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 criteria 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 their money where their mouth is.
1. Tai Sin Electric Ltd (SGX: 500)
Tai Sin Electric, as its name suggests, deals with electrical products. The company manufactures and distributes a wide variety of electrical cables and wires and also provides cabling and wiring solutions for industrial, commercial, residential, and even offshore & marine projects.
In terms of geography, the most important markets for Tai Sin are Singapore and Malaysia. The two countries had accounted for 79% and 11%, respectively, of Tai Sin’s total revenue in its fiscal year ended 30 June 2015 (fiscal 2015).
Lim Boon Hock, the chief executive of Tai Sin Electric, had bought a total of 223,300 shares of the company on two occasions this month (18 and 21 March). The purchases, which were done at a price of S$0.315 per share, had bumped up Lim’s total interest in Tai Sin Electric from 11.602% to 11.653%.
Tai Sin Electric had turned in lackluster results for the first-half of fiscal 2016. In that period, revenue had inched up by just 1.3% year-on-year to S$154.5 million and profit had slumped by 10.8% to S$9.47 million. Tai Sin Electric’s shares closed at S$0.32 yesterday. At that price, the company carries a trailing price-to-earnings (PE) ratio of just 8.8.
2. Marco Polo Marine Ltd (SGX: 5LY)
Marco Polo Marine is in the business of owning and chartering ships and building and repairing vessels. The firm has an international presence, with it sourcing revenue from a number of countries such as Singapore, Indonesia, Australia, Thailand, and more.
In the month of March thus far, Lee Wan Tang, Marco Polo Marine’s executive chairman, has bought shares of his firm on two occasions (9 and 16 March 2016) through his investment vehicle, Nautical International Holdings. Lee had bought 131,600 shares for a sum of just over S$25,000, in the process pushing up his total stake in Marco Polo Marine from 61.96% to 62.0%.
At their closing price yesterday of S$0.19, Marco Polo Marine’s shares have a trailing PE of 58.
The company’s business has had a terrible time of late. In Marco Polo Marine’s fiscal year ended 30 September 2015 (fiscal 2015), it had seen its revenue and profit fall by 17% and 16%, respectively. In the first-quarter of fiscal 2016, the company’s top-line dropped by 36% while its bottom-line fell off a cliff, plunging from a profit of S$7.4 million a year ago to just S$19,000. Headwinds in the oil & gas industry have hit the firm hard.
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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.