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Occasionally, I would look at insider or share buybacks to test my luck in spotting hidden gems. In fact, this is also one of the more commonly used strategies by investors. Why is that so?
As the legendary Fund Manager Peter Lynch once said:
“Insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise.”
In short, a company’s management would only purchase the stock or initiate share buybacks when they perceive that the stock is undervalued. Hence, it makes sense for investors (like you and me) to do some further research to see if the stock is really a bargain per se.
With these in mind, let’s zoom into 3 interesting companies I’ve cherry picked which have recently experienced insiders buying back shares.
1. Katrina Group (SGX:1A0)
Katrina Group Ltd operates restaurants and cafes. Some of the brands that you may find familiar are Bali Thai, Honguo, Muchos, So Pho, Indobox, Bayang, and many others. The company operates in Singapore and in the People’s Republic of China.
On 25 January, CEO Alan Goh Keng Chian, bought 40,000 shares via market transaction, increasing his deemed interest to 45.24%.
Katrina Group’s shares closed at S$0.199 each on Wednesday, giving the company a price-to-earnings ratio of only 58.29x and a dividend yield of 1.44%.
2. Hwa Hong Corporation Ltd (SGX:H19)
Hwa Hong Corp Ltd is an investment holding company. The subsidiary companies are engaged in property rental investments, developments and investment holding. The group has 2 distinct business segments, namely the property and investment segment.
The company is involved in the leasing of residential and commercial properties; and ownership of warehouses for rental and storage, as well as packing and trading of edible oils. It also provides business management and consultancy services.
On 15 February, Mr Ong Eng Hui David, bought 36,000 shares via the open market, increasing his total stake in the company from 14.961% to 14.967%.
Hwa Hong Corporation’s shares closed at S$0.29 each on Friday, giving the company a price-to-book ratio of 1.01x and a dividend yield of 3.45%.
3. SingPost (SGX:S08)
SingPost needs no formal introduction as you would often see their mailman delivering letters and parcels around the HDB flats in the neighbourhood. They are best known for their postal services where they hold the only public postal license in Singapore. Besides that, they also operate their logistics arm, eCommerce arm, as well as their property arm in the form of SingPost Centre.
Recently in January, SingPost made a public apology over its “service deterioration” in the recent weeks involving a few postmen with questionable practices.
“In February 2018, a SingPost postman was fired after he was found to have discarded returned letters and direct mail into various dustbins at the condominium”.
On 20th September, Temasek Holdings, a major shareholder of SingPost, bought 80,000 shares through DBS Bank Holdings, increasing its total stake amongst subsidiaries from 21.99% to 22.00%.
SingPost’s share price closed at S$0.955 at the time of writing, giving the company a price-to-earnings ratio of 18.94x and a tasty dividend yield of 3.68%.
Seedly Contributor: SmallCapAsia
SmallCapAsia is a website focused primarily on undervalued gems that can generate Big, Fat Returns for investors. Their Slogan is simple: Start Small, Win Big!
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