I’ve been keeping a close eye on what substantial shareholders have been doing recently.

Substantial shareholders are shareholders that hold 5% or more of a company’s shares. These tend to be large investors, asset managers, and investment funds. These shareholders are obliged to update the market when they make any changes to their holdings.

As a result, I feel investors should look to use these notices to their advantage. After all, they show where the smart money is going.

Two notices that have caught my eye are summarised below:

Altium Limited (ASX: ALU)

According to a notice of initial substantial holder, Pinnacle Investment Management has just become a substantial shareholder of this electronic design software company. The notice reveals that Pinnacle has been adding to its position this month, bringing its total holding to 6,931,951 shares. This equates to a 5.29% stake in Altium. The fund manager was buying shares in or around the level Altium’s shares are trading at now. Which would appear to indicate that it believes they offer plenty of upside from here. I certainly believe this is the case and feel Altium is a top buy and hold option thanks to its exposure to the Internet of Things market.

Atomos Ltd (ASX: AMS)

According to a change of interests of substantial holder notice, Ellerston Capital has taken advantage of a pullback in this video hardware technology company’s share price to top up its position. The notice reveals that Ellerston has bought almost 6 million shares over the last couple of months. This lifted its holding to a total of 22,311,112 shares, which equates to 10.58% of its issued stock. The Atomos share price is down 72% from its 52-week high and at a level which this fund manager appears to believe is attractive. Its shares were hit hard after the pandemic shut down its core pro video market. But with economies slowly reopening around the world, this fund manager may be expecting a rebound in sales and its share price in the near future.

More reading

• Is the Altium share price a buy at $36?
• 3 top ASX growth shares that could smash the market in the 2020s
• 3 shares I’d buy if the coronavirus selloff gets worse
• How to become a millionaire with a $5,000 investment in ASX 200 shares each year
• 5 things to watch on the ASX 200 on Thursday

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Atomos Ltd. The Motley Fool Australia owns shares of Altium. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Is the Altium Limited (ASX: ALU) share price a buy at $36? I think the electronic PCB software business is a great company.

Altium’s share price has been a strong performer over the past couple of months. Since 23 March 2020 the Altium share price has gone up by 45%. That’s strong gains if you bought at the time, but what about now?

There are plenty of reasons to like Altium:

Growing profit margins – A business can grow its profit faster than revenue if the profit margin can increase as economies of scale keep increasing. These are the types of businesses we want to have in our portfolio. Altium is a great example of this effect (in normal times).

Strong balance sheet – It’s the businesses with a strong balance sheet that are able to cope with the coronavirus situation the best. Altium has no debt and a solid pile that was growing, until recently at least.

Excellent management – I think the management is one of they key reasons the Altium share price has done so well over the past decade. They are long-term focused, set tough but attainable goals and are very considered with capital.

Growing dividend – There aren’t many businesses that offer that attractive combination of fast growth and a growing dividend. Plenty of businesses retain all their profit for further growth. But a dividend is a nice way of getting returns without resorting to selling shares.

So Altium’s share price is a buy today?

I’m confident about Altium’s long-term future. The issue I see is the short-term. Altium has already warned that it’s having to reduce prices to continue to attract new subscribers. That’s the right thing for the long-term – prices can be increased in the future. But it will hurt Altium’s profit in FY20 and maybe even FY21.

We don’t yet know how much profit pain that will entail. It’s true the Altium share price is being helped by the current ultra low interest rates. However, we should be cautious about businesses that are being priced with not much downside. I’d be interested if Altium’s share price was under $30, so I’m going to wait for a better buying opportunity.

More reading

• Fund managers have been buying these ASX shares
• 3 top ASX growth shares that could smash the market in the 2020s
• 3 shares I’d buy if the coronavirus selloff gets worse
• How to become a millionaire with a $5,000 investment in ASX 200 shares each year
• 5 things to watch on the ASX 200 on Thursday

Motley Fool contributor Tristan Harrison owns shares of Altium. The Motley Fool Australia owns shares of Altium. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Is the Altium share price a buy at $36? appeared first on Motley Fool Australia.

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