ARTICLES

Hulamin - Insider Trading

In our opinion on Hulamin, last updated on 3^rd 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:

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.

PDSNET ARTICLES

The Confidential Report - December 2021

America

The US economy is still booming. Weekly jobless claims, for the week ended 20 November 2021, fell 71 000, while consumer spending jumped 1,3% in October month alone. Third quarter gross domestic product (GDP) came in at 2,1% - hammered by supply constraints, but above analysts’ expectations. Unemployment has fallen to 4,6% and

Transaction Capitals Trendline

In last week’s article on Grand Parade, we drew your attention to the importance and usefulness of downward trendlines (drawn above a downward trend) in establishing the best point to buy a share. This week we draw your attention to the benefit of upward trendlines (drawn below a rising trend) as a method of determining when a share, with a strong rising trend, has corrected

Grand Parade Trendlines

Technical analysis, which is the search for and analysis of patterns in share price charts, can become very complex and mathematical. Literally thousands of line indicators have been developed which claim to improve the investor’s probability of being right when determining the moment when a share’s price turns. In our experience, the

Private Investor Advantage

Finding winning shares is not just about looking for quality. It is about finding quality when it is cheap – which usually means finding it when it has fallen heavily and is out of favour with institutional fund managers. We advise you to look for the “mountain behind you” in the chart.

As a private investor

The Confidential Report - November 2021

America

The S&P500 closed last week on another all-time record high at 4605 which means that the mini-correction of September/October is behind us and investors are now anticipating a Christmas rally. Consider the chart:

New Record High

As we predicted, the S&P500 reached a new all-time record high on Thursday 21^st October 2021 at 4549.78. This officially means that the correction that it was going through is over. That correction took the index down to a closing low of 4300.46 (on 4th October 2021) – which is a 5,2% decline from the cycle high of 4536.95

Calgro-M3

Calgro used to be the darling of the institutional investors. Every fund manager in South Africa was buying the share and it rose dramatically from as little at 50c in February 2011 to an intraday high of 2275c on 11^th August 2015. At this point it had a market capitalisation of R2,8bn and was trading on a price:earnings (P:E) ratio of

The Confidential Report - October 2021

America

The S&P500 is in a correction which began after 2^nd September 2021 when it made an all-time record high of 4537. Since then, it has fallen by as much as 249 points to an intra-day low of 4288 on Friday (1/10/21). This correction has taken 20 trading days and amounted to 5,4% at its worst. There are a variety

Context

The context within which a chart is viewed is vital to your understanding of it. In this article we will attempt to show the broader context within which we view the market action which took place last Friday.

INTRADAY

Let us focus our attention on the S&P500 index, which is a weighted average of the

Human Behaviour

Investing in shares is about predicting the future. When buying a share the buyer is saying that he expects its price to rise, while the seller, by his sale, clearly has the expectation that it will fall. Of course, only one of them can be right and whomever is right will take money away from whomever is wrong. And the outcome depends entirely on the accuracy of their predictions