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.” That’s because 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…
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.”
That’s because 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 buy shares, or in other words, putting their money where their mouth is.
1. TEE Land Ltd (SGX: S9B)
TEE Land is a real estate company that develops residential, commercial, as well as industrial projects. It also has investment properties in the form of hotels and real estate used for short-term accommodation purposes. The company has a presence in a number of countries, including Singapore, Malaysia, Australia, and more.
The month of May saw TEE Land’s chief executive, Phua Cher Chew, buy a total of 984,600 shares for nearly S$195,000 on four occasions. His purchases had increased his stake in TEE Land from 0.41% to 0.63%.
TEE Land’s latest quarterly earnings (for the three months ended 29 February 2016) were announced in early April. Revenue was up by 10.1% to S$9.2 million while net profit spiked by 66% to S$1.13 million.
But, the company warned that “the property markets in Singapore and Malaysia are expected to continue to remain challenging.” That said, there were some brighter spots elsewhere, as TEE Land also commented that (1) the Thai property market is “expected to remain relatively stable,” (2) growth in Australia’s tourism “will have a positive impact on the hotel industry” in the country, and (3) “demand for workers’ accommodation [in New Zealand] will continue to remain stable.”
TEE Land’s shares closed yesterday at S$0.19. At that price, the company has a price-to-book ratio of just 0.54.
2. Singapore Medical Group Ltd (SGX: 5OT)
Singapore Medical Group is a private specialist healthcare services provider with 23 clinics located in many medical facilities across Singapore. Some of these include Mount Elizabeth Novena Specialist Centre, Gleneagles Medical Centre, and Parkway East Medical Centre.
The company’s specialist services cover a wide range of specialties, including dermatology, ophthalmology, orthopaedics, urology, and more.
On 13 May 2016, Beng Teck Liang, the chief executive of Singapore Medical Group, had acquired 360,000 shares of his company for around S$58,000. As a result, Beng’s interest in Singapore Medical Group was bumped up slightly from 17.8% to 17.9%.
In the company’s latest earnings release (for the year ended 31 December 2015), it had experienced a 16.8% increase in revenue to S$31 million. But, the profit attributable to shareholders came in at a negative S$0.15 million due to higher costs resulting from business expansion.
The company commented in the earnings release that the “private healthcare industry in Singapore remains competitive and the industry had seen a slowdown in medical tourism due to the strong Singapore dollar and weak currency exchange in countries such as Indonesia, Malaysia, and Russia.” But, Singapore Medical Group remains undeterred and is driving ahead to grow its business via efforts such as branding and marketing to increase its patient load.
Singapore Medical Group’s shares were exchanging hands at S$0.15 each yesterday evening. The company’s valued at 1.3 times trailing sales at that share price.
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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.