Hulamin - Insider Trading

18 October 2021 By PDSNET

In our opinion on Hulamin, last updated on 3rd September 2021, we noted “What is noteworthy about this share is that it has a net asset value (NAV) which is more than 3 times its current share price making it a possible takeover target”.

On Thursday last week the company issued a bland “cautionary” notice on the Stock Exchange News Service (SENS) advising investors to exercise caution when dealing in its shares. In order to minimise the effect of insider trading, the JSE requires listed companies to publish a cautionary if they know of an imminent event which may have a significant impact on the share price.

Often, a cautionary announcement like this indicates that the company has become involved in negotiations with a potential suitor. Obviously, this can have major implications for the share price.

But what is interesting about the Hulamin case is that its share price and volume traded spiked up 3 days before the cautionary was published. Consider the chart:

Hulamin (HLM): 24 May 2021- 14 October 2021. Chart by ShareFriend Pro

The top chart shows a candlestick chart of the share from the end of May 2021 to date. You can see the sharp rise in price and where the cautionary was issued on Thursday last week. The middle chart shows the on-balance-volume (OBV) indicator which gave a strong buy signal on Tuesday. The bottom chart shows the volume traded and the black line through the middle of it is a 30-day simple moving average of the volumes.

What is noteworthy is that the volume traded before last week showed an average of 484 000 shares changing hands each day. On Monday last week (11/10/21) the share traded 681 000 shares, a 40% increase on the average, and closed up 11% at 250c. On Tuesday the volume was just under 2 million shares traded and the price rose to 274c. On Wednesday when about 1,5 million shares changed hands it closed at 319c.

To us, this indicates quite clearly that some of the people who were privy to whatever is going on bought up large quantities of the share, directly or indirectly, before Thursday’s announcement. What else could possibly account for the sudden rise in volumes and prices just days before such an announcement?  

As you can see, on Thursday, once the announcement was made public, the share jumped almost R1 per share netting the insiders a tidy profit of about 30% in a couple of days. They probably sold out on Friday and put their profits in the bank.

Insider trading is illegal, but it is commonplace on the JSE. As a private investor you can see it happening, and even jump on the bandwagon, by watching the volumes traded and the movement of the closing prices. If you see radically increased volumes with slight increases in price then you may well be looking at insider trading prior to a public announcement, especially when a share has been trading at less than a third of its Net Asset Value (NAV).


DISCLAIMER

All information and data contained within the PDSnet Articles is for informational purposes only. PDSnet makes no representations as to the accuracy, completeness, suitability, or validity, of any information, and shall not be liable for any errors, omissions, or any losses, injuries, or damages arising from its display or use. Information in the PDSnet Articles are based on the author’s opinion and experience and should not be considered professional financial investment advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional. Thoughts and opinions will also change from time to time as more information is accumulated. PDSnet reserves the right to delete any comment or opinion for any reason.



Share this article:

PDSNET ARTICLES

Exponential Growth

The  S&P 500 index is important because all the stock markets around the world tend to follow it. If the S&P is in a bull trend then London, Tokyo and the JSE will also be in a bull trend – and vice versa.

The S&P500 index began 68 years ago on 4 th March 1957 with an initial value of 43,73. It took nearly

The US Jobs Market

International investors who trade on Wall Street are generally negative about any good news from the economy because it tends to make the monetary policy committee (MPC) more hawkish and less likely to reduce interest rates. The opposite is also true. But there comes a point where bad news is so bad that investors begin to fear that the US economy is heading

Jackson Hole

Once a year in late August central bankers and academics congregate in Jackson Hole to discuss the state of the economy and consider the way forward. Traditionally, the Chair of the Federal Reserve Bank (“the Fed”) addresses the meeting and gives direction to its thinking on monetary policy in the US. This year, the comments of Jerome Powell resulted in the

Choppies

Choppies is a supermarket chain which operates in Botswana, Namibia and Zambia. It is listed both on the Johannesburg Stock Exchange (JSE) and on the Botswana Stock Exchange (BSE). Notably, the company has resisted the temptation to re-enter the highly competitive and cut-throat retail market in South Africa, having exited that market in 2020 due to sustained losses. Despite

Gold Resistance

All investments throughout the world can be ranked on a scale from high risk to low risk. As a general rule, in the world of investment, risk and return rise together. In other words, as the risks in an investment increase, so does the return necessary to attract investors.

At the one end of the scale there are very low risk investments

Sibanye takes off

We have been writing about Neal Froneman and Sibanye for years now. Beginning in 2013, Froneman assembled the Sibanye group over a period of 7 years, buying up mining operations both in South Africa and America at bargain prices. Initially he bought precious metals producers, but more recently he has been diversifying into base metals like zinc and lithium which

The 16 Year Bull Trend

Since the Second World War, the stock markets of the world, including the JSE, have always tended to follow the New York Stock Exchange (NYSE) - and the NYSE is best measured by the S&P500 index (S&P) of its 500 largest companies.

For this reason, we believe it is important for private investors to constantly

CA Sales Revisited

Retailing in Africa is difficult with many of our leading retailers having attempted to open stores in countries to the North of us without notable success. These countries are often unstable and volatile politically. Getting adequate stock to branches has proved problematic and expensive.

It is not surprising therefore that a company has been

Bluetel

Bluetel (BLU) is a company involved in pinless top-ups, prepaid electricity, ticketing and universal vouchers. As such it is a company with substantial repeat business from existing customers. This type of business model is attractive to investors because it implies minimal working capital and strong cash flows.

Bluetel’s purchase

The Debtors' Book

A BIT OF HISTORY

Many years ago, in 1982 when I started this business (which became “PDSnet”), I ran advertisements in both the Rand Daily Mail (RDM) and in the Star – which were the two most widely read newspapers in Johannesburg at the time. At that time, we were a very small business and had no credit rating at all. Despite this the RDM immediately