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2 Companies With Insiders Eating More Of Their Own Cooking

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. 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 I’ve chosen at random that have recently seen insiders buy shares.

  1. Super Group  (SGX: S10)

Super Group is a food and beverage (F&B) company with operations primarily in Asia. It has two business segments, namely, Branded Consumer (BC), and Food Ingredients (FI). Under the former, Super Group creates instant beverages such as coffee and tea. As for the latter, the company manufacturers ingredients that go into the production of other beverages.

You can also read more about the company here and here.

Under his privately-held company Tee Yih Jia Food Manufacturing Pte Ltd, Mr. Sam Goi, had bought a total of 3.69 million shares of the company on several occasions from 24th August. Famously known as the ‘Popiah King’, Mr Sam Goi also sits on Super group’s board as the Vice Chairman & Non-Executive Director. With these purchases, his total stake is increased from 15% to 15.34%.

Super Group’s share price closed at S$0.81 on Wednesday evening and trades at 20.1 times its trailing earnings. In its latest second-quarterly earnings, total revenue slipped 8% to S$115 million, while net profits decreased 7% to S$9.8 million, dragged down by lower sales revenue, higher selling & distribution and higher general & administrative expenses.

  1. Hiap Seng Engineering  (SGX: 510)

Established in 1971, Hiap Seng provides engineering services covering engineering, procurement & construction (EPC) projects and plant maintenance services for the oil-and-gas, petrochemical, and pharmaceutical industries in Singapore and beyond.

The Group owns five well-equipped fabrication yards based in Singapore and Thailand, with a total land area of about 2.2 million sq ft and a workforce of about 1,500 skilled employees.

Mr. Tan Lian Chew, the company’s Executive Director, has acquired 521,000 shares on three occasions in the month of August. With that, his stake is bumped up from 1.01% to 1.186% in the firm.

The company delivered a good scorecard in its latest first-quarter results with total revenue up 19.3% to S$39.4 million. Net profits also increased, up 28.7% to S$2.5 million from last year achieved mainly due to a higher recognition of plant construction and maintenance revenue.

Hiap Seng Engineering Group’s shares closed at S$0.13 each yesterday. At that price, the firm has a price-to-earnings ratio of 6.2 and sports a juicy dividend yield of 7.4%.

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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. Super Group has been recommended by Stock Advisor Gold.