Back in June 2017 we said that Pharma sector was undervalued because lot Pharma companies had received complaints from US FDA about regulatory, compliance issues about their manufacturing plants. Some companies like Divis Lab’s share price dropped like a rock.
Now just because the share price crashed does not mean you should buy it but if the company has good financials and if you can figure out if the problem due to which the price crashed is temporary then you should buy the shares.
With the above scenario if you notice insiders buying the shares as well then it confirms your analysis and its another confirmation signal when you buy.
Madhusudana Rao Divi who is a director bought 20,000 shares after the first price crash in late December.
Raja Divi bought 10,000 more some later after the second price crash.
Our Professional members get this information in an email which lists the insider buying and selling every day in the evening.
The share price chart gives a good picture when the insiders were buying.
There were around 6 months when the share price was bouncing around 700 Rs to 545 Rs, we kept on buying during that time with an average share price of 600 Rs. The current market price is 1300 Rs. 100% + return in 15 months.
A good company with some temporary problems with insider buying, all you have to do is buy and wait. The market will reward you eventually.
Disclosure – Long Divis Lab