Insiders are buying these five stocks amid the pullback

“If you have been following my articles, one of the things I track for my watch list is insider action.

Unlike in the case of IPOs, which 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 are 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 with their personal money at the market price, it signals confidence."

Her analysis is bang-on and I 100% agree with her. In this volatile environment, insider activity is a good point to start digging further into stocks.

With that in mind, let’s look at a few stocks that have seen insider buying in the past few trading sessions.

#1 NRB Bearings

Founded in 1965 in Mumbai, NRB Bearings was the first company in India to manufacture needle roller bearings. It now offers a wide range of bearings, including a new generation of lightweight drawn cup bearings.

Harshbeena Zaveri, the company’s promoter and director, recently bought shares in three tranches – 37,805 on 11 November, 25,929 on 12 November, and 37,126 on 13 November.

Also read: Your watchlist amid the market correction

A look at the company’s shareholding pattern over the past eight quarters reveals a trend. Promoters have consistently bought stakes from the open market and increased their holdings.

NRB Bearings shareholding

In theauto sector, the company’s strategy is de-risked as it serves all segments – commercial vehicles, two- and three-wheelers, and passenger cars. It also caters to the agriculture and construction equipment industries, as well as global defence.

Original equipment manufacturers (OEMs) and tier-1 clients account for 60-65% of its revenue. The rest comes from export (25%) and aftermarket (10-12%). No single customer accounts for more than 6-7% of total revenue, which reduces 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-vehicle makers in Europe, America, Japan, and Korea.

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What sets it apart is a strong research and development arm that allows it to introduce new and more efficient products. Its product range spans more than 3,000 designs that are customised to clients' needs. It has expanded its product portfolio to include EV hybrid and EV agnostic products, and has been contacted by several foreign OEMs interested in such products.

The company is also likely to benefit from structural tailwinds such as the ‘China-plus-one’ strategy, the government’s production-linked incentive (PLI) scheme, localisation rules, and the vehicle-scrapping policy to take old and unfit vehicles off the roads.

The company has a 15% return on capital employed. The Ebitda margin for FY24 was 17.4% and the dividend payout was more than 20%. Debt-to-equity is at a comfortable 0.2.

#2 Orient Bell

Headquartered in Delhi, the company has been manufacturing and selling tiles since 1977.

With a revamp of its leadership team that started in 2018, the company is making its mark on the tile industry and has changed from an owner-managed business to a professionally run company. Orient Bell primarily uses natural gas as the fuel to manufacture tiles and has a tie-up with GAIL for its own manufacturing units.

From 8 to 14 November, the company’s promoter and director Mahendra K Daga bought shares from the open market in five transactions, increasing his stake from 23.18% to 23.42%. The promoter holding is actually down over the past year, but this might change with the latest purchase.

Orient Bell shareholding

Going forward, capacity expansion is expected to drive growth.

Shares of the company are currently under pressure following a muted Q2 earnings report. While declaring its earnings, the company said domestic demand remains stable, but export markets have been affected by volatile ocean freight rates.

Overcapacity issues, particularly in Morbi, have affected pricing and volume buildup. Management has guided for a better second half as the company is seeing new projects being lined up in the private sector as construction picks up.

#3 Poonawala Fincorp

One of the company’s promoters – Rising Sun Holdings – has bought 2.2 million shares from the open market in six tranches since 31 October, raising its holding from 61.97% to 62.22%.

This should bring respite as the promoter holding had fallen for two consecutive quarters.

Poonawalla Fincorp shareholding

Poonawalla Fincorp is a non-banking financial company (NBFC) that offers a diversified suite of loans to consumer and small businesses.

The company recently posted earnings for the second quarter that were below expectations. It reported a net loss of ₹470 crore during the quarter due to a credit cost of ₹910 crore, including a ₹670 crore one-time provisioning on the short-term personal loans (STPL) book. The stock plummeted 20% on the day of the results. Management was quick to provide comfort, saying that a review of the entire portfolio was complete and that no additional provisions would be required.

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During the quarter, the company unveiled six new products and omni-channel (online and offline) distribution. These efforts are expected to help Poonawala deliver 5-6x growth in assets under management over the next six years.

#4 Tokyo Plast

Set up in 1992 by Velji Shah, the company makes various types of plastic thermoware products including lunchboxes, ice coolers and ice jugs at its facilities in Daman and Kandla in Gujarat. It markets these under the Pinnacle brand. The majority of its revenue (85%) comes from exports.

On 31 October, promoter Priti Haresh Shah bought 9,813 shares of Tokyo Plast on the open market, increasing his holding from 9.54% to 9.65%.

Promoters of Tokyo Plast have bought shares over the past two quarters, taking their holding from 63.65% to 64.29% as of September.

Tokyo Plast shareholding

The company’s financials have been shaky, with revenue growing at a compound annual rate of 3.4% over the past five years. The company recently received approval to set up a new factory on its own premises for its wholly owned subsidiary, Pinnacle Drinkware. With this, the company is expected to leverage growth opportunities in the evolving mobility space.

#5 Om Infra

This infrastructure firm has diverse business activities and interests related to hydro-mechanical equipment, turnkey solutions for steel fabrication, hydropower developments, real estate, entertainment centers, and hotels.

It has a presence in several verticals including hydroelectric power projects, pump storage projects, Jal Jeevan Mission projects, irrigation projects, water supply projects, and river interlinking projects. Ace investor Vijay Kedia has a significant stake in it.

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One of its promoters – Jupiter Metal – bought shares in three tranches on 12 and 13 November, increasing its holding from 1.9% to 1.93%. The purchase comes at a good time for shareholders as the promoter holding had fallen over the past two quarters.

Om Infra shareholding

The company's outstanding order book remains healthy at about twice its FY24 revenue, and provides revenue visibility for the coming years.

The order book is well diversified with a good mix of hydropower, pump storage, and Jal Jeevan Mission projects and the company expects to bag orders worth ₹500-1,000 crore

Equitymaster stock screener: Stocks bought by promoters

Here are some other stocks that have seen consistent buying from promoters in the past four quarters.

Conclusion

Insider buying in stocks can be a signal of renewed confidence among company leaders in their organisations' prospects. It may be an indication that executives believe their shares are undervalued or that positive developments are on the horizon. By keeping an eye on these stocks and monitoring insider activity, investors may uncover opportunities that align with their financial goals.

However, it's crucial that investors conduct their own research and consider other market factors before making decisions as insiders buy stocks for a range of reasons, from raising capital to preventing hostile takeovers and meeting legal requirements.

Happy investing!

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such.

This article is syndicated from Equitymaster.com