5 Stocks with Notable Insider Buying in this Volatile Market

My colleague and lead smallcap analyst at Equitymaster, Richa Agarwal, recently wrote about insider buying amid this market correction.

Here's Richa:

• If you have been following my articles, one of the things I track for my watchlist is insider action.
  
  Unlike in the case of IPOs that flourish in overvalued markets allowing promoters to monetise their stake at the best price possible, open market purchases by promoters in listed companies amid a market correction, is a good starting point to dig further.
  
  As owners of the business, they are the majority stakeholders with the longest term horizon in most cases. If they are willing to buy a meaningful quantity of stock from their personal money at market price, it signals confidence.

Her analysis is bang on and I 100% agree with her.

In this volatile market environment, insider activity is a good point to start digging further into stocks.

Keeping that in mind, let's look at a few stocks that have seen insider buying in the past few trading session.

#1 NRB Bearings

First on this list is NRB Bearings.

Founded in 1965 in Mumbai, NRB Bearings is the first company in India to manufacture needle roller bearings.

The company now offers a wide range of bearings, including a new generation of lightweight drawn cup bearings.

Coming to its recent promoter buying activity, Harshbeena Zaveri, promoter and director of the company, bought shares of NRB in three tranches on three days starting from 11 November 2024 to 13 November 2024.

The actual shares bought by her on 11, 12 and 13 November stood at 37,805, 25,929, and 37,126 shares, respectively.

Even if you look at the company's shareholding pattern for the past eight quarters, the same trend is visible... promoters have bought stake from the open market and upped their holding.

Within the auto sector, the company's strategy is de-risked as it serves all segments - the commercial vehicle, two/three-wheeler, and passenger car segments. It also caters to agriculture and construction equipment industries, and global defence too.

OEMs and tier 1 clients account for 60-65% of its revenues. The rest comes from export (25% of revenue) and aftermarket (10%l-12% of revenue).

No single customer with its tier-1 supplier accounts for more than 6-7% of the total revenue, limiting customer concentration risk.

Exports are dominated by segments such as hybrid and E-Drive passenger cars and trucks, and electric power trains. It supplies to the world's foremost E-vehicles in Europe, America, Japan, and Korea.

What sets it apart is a strong R&D arm that allows it to introduce new and more efficient products. Its product range spans over 3,000 designs, which are customised as per clients' needs.

With an expansion of product portfolio to include EV hybrid and EV agnostic products, it has been contacted by several foreign OEMs interested in such products.

Apart from market leadership, innovative products, and strong relationships with clients in India and abroad, the company is likely to benefit from structural tailwinds such as China plus one, and other industry tailwinds like the PLI scheme, localisation norms, and the vehicle scrappage policy to remove old unfit vehicles from the roads.

Coming to its financial performance, the return ratios stand at 15%. EBITDA margin for FY24 was 17.4%. The dividend payout in FY24 was over 20%. The debt to equity is at a comfortable 0.2.

For more information, check out NRB Bearings' detailed financial factsheet.

#2 Orient Bell

Next on this list is Orient Bell.

Headquartered in Delhi, the company is engaged in the manufacturing, trading, and selling of tiles has been in existence since 1977.

While it has taken a few decades, finally with a revamp in the leadership team that started in 2018, the company is making its mark in the tile industry and has changed from an owner managed business to professionally run company.

Orient Bell primarily uses natural gas as a fuel for tile manufacturing. For its own manufacturing units, it has tie up with GAIL. For its tie ups in Morbi, the gas supply comes from Gujarat Gas and along with the use of propane.

Coming to its promoter buying activity, starting from 8th November till 14th November, the company's promoter and director Mahendra K Daga has bought shares from the open market on 5 instances.

His stake prior to these purchases was 23.18%, which has now gone up to 23.42%.

In the past one year, the promoter holding has come down, but it might change with the recent purchase.

Here's a table showing the shareholding of Orient Bell for the past 8 quarters -

Going forward, the company's capacity expansions are expected to drive growth.

Right now, shares of the company are under pressure following a dampened Q2 report. The company, while declaring its Q2 earnings, said that domestic demand conditions remain stable however export markets have been impacted by volatile ocean freight rates.

Overcapacity issues, particularly in Morbi, have affected pricing and volume buildup.

The management has guided for a better second half, as the company is seeing new projects lined up in the private sector as construction activities are picking up.

To know more, check out Orient Bell's financial factsheet.

#3 Poonawala Fincorp

Third on this list is Poonawala Fincorp.

Starting from October 31, one of the promoters of Poonawala - Rising Sun Holdings - has consistently purchased shares from the open market in six different tranches.

Prior to this, the holding stood at 61.97%. This has gone up to 62.22% after the recent purchase.

Overall, a combined 2.2 million shares were bought by Rising Sun Holdings.

This should come as a respite as the promoter holding was going down for the past two consecutive quarters.

Poonawalla Fincorp is a non-banking financial company (NBFC) that is engaged in consumer and MSME financing.

The company offers a diversified product suite to address the growing financing needs of its customers and enterprises.

Recently, the company posted earnings for the second quarter which were below expectations.

The company reported a net loss of Rs 4.7 billion (bn) during the quarter due to the credit cost of Rs 9.1 bn, including Rs 6.7 bn one-time provisioning on the short-term personal loans (STPL) book. Resultantly, the stock saw a sharp decline of 20% on the day of results.

The company's management was quick enough to provide some comfort by stating that review of the entire portfolio is complete and there should not be any need for additional provision.

During the quarter, the company unveiled 6 new products and its omni-channel phygital distribution. These efforts are expected to help Poonawala deliver 5-6x AUM growth in the next 6 years.

For more details, see the Poonawalla Fincorp company fact sheet and quarterly results.

#4 Tokyo Plast

Next on this list is Tokyo Plast.

Tokyo Plast was set up in 1992 by Mr Velji Shah. The company manufactures all types of plastic thermoware products, including lunch boxes, ice cooler boxes, and ice jugs at its facilities in Daman and Kandla in Gujarat.

It markets these under the Pinnacle brand. Majority of the company's revenue (85%) comes from exports.

On 31 October 2024, one of its promoters Priti Haresh Shah bought 9,813 shares of Tokyo Plast from the open market.

Her holding prior to this was 9.54% which has gone up to 9.65% now.

If you look at the past two quarters, promoters of Tokyo Plast have bought shares taking their holding from 63.65% to 64.29% as of September 2024.

The company's financials have remained shaky over the years, with 5-year revenue CAGR at 3.4%.

The company recently got approval to establish a new factory on its owned premises for its wholly owned subsidiary, Pinnacle Drinkware.

By setting up of this wholly owned subsidiary, the company is expected to leverage the growth opportunities in the evolving mobility space.

For more, check out Tokyo Plast's financial factsheet.

#5 Om Infra

Last on this list is Om Infra.

The company is an infrastructure firm having diverse business activities and interests related to hydro-mechanical equipment, turnkey solutions for steel fabrication, hydropower developments, real estate, entertainment centers, and hotels.

The company has a presence in multiple verticals including hydroelectric power projects, pump storage projects, Jal Jeevan Mission projects, irrigation projects, water supply projects, and also river interlinking projects.

Ace investor Vijay Kedia also holds a significant stake in the company.

Coming to its recent promoter buying activity, one of its promoters - Jupiter Metal purchased shares of Om Infra in three tranches on 12 and 13 November.

Jupiter bought 5,000, 12,888, and 15,000 shares of the company from the open market during these days.

Prior to this purchase, the holding was 1.9% which has gone up to 1.93%.

This purchase comes at a good time as promoter holding in the stock has gone down for the past two quarters.

The company's outstanding order book remains healthy, about 2x of its FY24 revenues and provides revenue visibility for the coming years.

The order book is well diversified with a good mix of hydropower and water projects pump storage projects, and also Jal Jeevan mission projects. The company is expecting to earn anywhere between Rs 5-10 bn in terms of new orders.

To know more, check out Om Infra's financial factsheet.

Snapshot of Stocks Bought by Promoters on Equitymaster's Stock Screener

Here's a table showing some other stocks which have seen consistent buying from promoters for the past 4 quarters -

In Conclusion

The resurgence of insider buying in these stocks signals a renewed confidence from company leaders in their organizations' future prospects.

This trend can often indicate that executives believe their shares are undervalued or that positive developments are on the horizon.

While insider buying can be a promising indicator, it's crucial for investors to conduct thorough research and consider other market factors before making decisions.

By keeping an eye on these stocks and monitoring insider activity, investors may uncover opportunities that align with their financial goals.

However, investors must also pay attention to the risks involved in pursuing this trend.

Insider trading can be for a lot of reasons involving raising of capital by company where promoters infuse a larger share of the QIP, preventing hostile takeovers, requirement by law, etc.

Remember the challenges before diving headfirst.

Happy Investing!

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...