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…
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 I’ve chosen at random that have recently seen insiders buy shares.
- Pacific Radiance Ltd (SGX: T8V)
Pacific Radiance owns and operates a fleet of over 130 young and diverse offshore vessels. It is also a provider of subsea services, shipyard services, marine equipment as well as project logistics to the global oil and gas industry. Headquartered in Singapore, its operations spans across Asia, Latin America, Africa, and Australia.
On 27 September 2016, Mr. Goh Chong Theng, an Independent Director of the company, bought 50,000 shares in the market at an average price of S$0.138 each. The move boosted his stake in Pacific Radiance from 0.027% to 0.034%.
In its latest second-quarterly earnings, total revenue inched up 9% to US$20.0 million. However, net losses widened to US$62.8 million, mainly due to an impairment costs of US$46.0 million. Mr Pang Yoke Min, Executive Chairman of Pacific Radiance has mentioned that the company is now reducing costs and streamlining operations, as well as starting up the ship repair yard in August 2016 for additional revenue streams.
Pacific Radiance’s share price closed at S$0.149 on Wednesday evening and currently does not have a P/E ratio because of losses in the past 12 months. The shares have fallen more than 50% from a year ago due to challenging conditions in the oil & gas sector.
- Tat Hong Holdings Ltd (SGX: T03)
Tat Hong is a supplier of cranes and heavy equipment to a wide range of industries such as construction and engineering, oil and gas, and infrastructure. According to its website, it is “the largest crane company in the Asia-Pacific region and seventh worldwide” in terms of aggregate tonnage.
The company currently has operations in the Asia-Pacific region including Singapore, Malaysia, Thailand, Indonesia, Hong Kong, China, Vietnam, and Australia.
Mr. Ng Sang Kuey, the company’s Executive Director, has acquired 60,000 shares for S$28,690 on two occasions in September 2016. With that, his total stake has increased from 0.78% to 0.80% in the firm.
The company reported dismal first-quarter results (FY2017) ended 30 June 2016. Total revenue slumped 16% to S$116.7 million and net losses of S$3.8 million were reported compared to S$5.6 million of net profits last year. Unfortunately, the management does not see a rebound for the rest of FY2017, owing to weak demand in the Asia region and competitive market conditions.
Tat Hong’s shares closed at S$0.475 each yesterday. At that price, the firm has no price-to-earnings ratio as it is loss-making for the past twelve months.
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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.