A company insider has real-time knowledge of ins and outs of their organization. Prices of a company’s stock change frequently, but if an insider purchases equities when prices decrease, this anticipates a possible rise in the future. Referred to as a "dip", this is simply a hiccup and the asset's worth will rebound over time. Additionally, this activity can gauge the management's confidence in their company. In short, it’s a green signal for all investors.
To illustrate the importance of analyzing ‘buying the dips’, 2iQ experts have produced a report on significant insider trading at Treet Corporation Ltd (TREET:PA). Based in Pakistan, the company specializes in manufacturing shaving blades and razors which reach 40+ countries across 6 continents, making it the definition of a truly global brand. Treet Group is listed on the Pakistan Stock Exchange PSX and currently has a market capitalization of $46.7 million.
Treet Corporation Ltd - Insider Buying
Our data shows that Treet’s stock price on 20 September was around $50 per share, which descended to roughly $40 on 24 September. Later on 6 October, the stock price went up to $51.
During this dip, between 24 September to 6 October, Treet Group’s Executive Director, Syed Shehrayar Ali bought stock on the following four occasions:
- On 24 September, he bought 250,000 TREET shares at a price of Rs. 41.584 per share.
- On 28 September, he purchased 250,000 TREET shares at a price of Rs. 40.59 per share.
- On 29 September, he bought 120,000 TREET shares at a price of Rs. 41.15 per share.
- On 6 October, he purchased 100,000 TREET shares at a price of Rs. 50.672 per share.
These purchases cost the insider around $201,000, which raised his holdings by 7.14%. Ali’s buyings continued even after the price increased, signifying the insider’s optimism that the stock value will rise further in the future.
Bullish Dip Buying
‘Buying the dip’ is a classic Insider Trading strategy. Simply put, the management buys the company stock when it has declined in value. This is seen as bullish since it shows the insider’s unshakable confidence about prices rising.
The stock's future looks hopeful post-dip, not only because a top-level insider is involved but also since the stock rate continues to increase. Even the fact that the Director spent $200,718 on shares alone implies his optimism.
Surpassed the Growth Targets
Recently, Treet’s Q3 results showed that the company has been making a good recovery after COVID-19.
For nine months, the operating profit was Rs. 636 million, which was an improvement (+521.19%) over the corresponding period last year. This mainly resulted from soaring sales volumes. The group’s turnover was Rs. 10,694 million, registering an increase of Rs. 1,792 million (+20.13%) over the same period in the previous year. Tax relaxation on the company's merchandise resulted in conserving Rs. 321 million which is 80.33% higher than last year.
In the light of these strong results and dip-buying, we see the insider buying here as a bullish indicator. For more on 2iQ’s insider buying reports, check out the 2iQ blog.