Stocks with insider buying
After threatening to break the 6,900 support, the PSEi instead surprised the market and rallied by a total of 146.75 points or 2.1 percent last week.
Numerous factors triggered the market’s recovery, such as the drop in oil prices, the weakness of the US dollar and the strengthening of the peso, and the strong performance of selected emerging market equities.
Although there are still no convincing signs that the market’s recovery is sustainable, one thing is for sure—valuations of Philippine listed stocks are already very attractive.
Aside from the usual valuation measures such as the price to earnings (P/E) and the price to book value (P/BV) ratios, another indicator that stocks are cheap is increasing insider buying.
Insider buying is defined as the acquisition of stocks in a listed company by someone who is considered to be an insider such as a director, officer, or employee.
Insider buying is viewed as a bullish signal because insiders know their company’s operations well and are privy to financial information.
Insiders will also most likely buy their own stock only if they know that their company will perform well or that their stock is underservingly cheap.
In fact, there are numerous studies supporting the argument that stocks with insider buying outperform the market.
Although the presence of insider buying does not automatically mean that a stock will go up, the likelihood that the stock will perform poorly because of significant problems such as collapsing sales or a looming bankruptcy is also very small. This in turn reduces the likelihood that shares of companies with insider buying will stay depressed for a long period of time.
Among the stocks that are part of COL Financial’s coverage list, here are companies with net insider buying for the year-to-date period.
All stocks that are on the list are also cheap in our opinion.
As such, you may consider adding these stocks to your short list of stocks to buy.
