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High Street Store

It’s interesting to see over the last week or so directors at Halfords (HFD), Woolworths (WLW),  N Brown (BWNG), Instore (INST) and Kingfisher (KGF) add to their holdings.

Buys in the General Retailers sector over the last month took place at 14 companies (net 1 month, over £50k, source digitallook), with no companies reporting director sales. This compares with data showing, over the last twelve months (same criteria over total of twelve months), 32 companies with net buys, and 14 with net sells. I believe this to be a significant indicator for the sector, however when looking at individual companies the ‘value’ of this signal is not so clear.

In analysing directors dealings I look for a change of attitude (ie from buy to sell or vice versa) and a historically successful track record in dealing by directors of the company.

Kingfisher (KGF, 133p) Ian Cheshire, CEO, added to his holding this week by buying 268,000 shares at 148p. But he also bought stock in October ’06 at 256p. Is he averaging down, or is this a vote for himself, having taken on the CEO position on January 28th?

N Brown (BWNG, 243p) shows the CEO buying 150k at 240p, but the CFO selling 56k shares at the same price. So in my mind they cancel each other out.

However at Halfords (HFD, 276p), two non execs bought a smallish amount of shares at 269p.  This is Wilsons first foray, and Pym, Halfords Chairman, increased his position by about 50%. What is interesting is that Pym bought  stock in June 2006 at 289p, also 10,000 shares. Halfords share price then ran to 411p in July 2007, which incidentally is where CEO Mcleod sold a significant block of stock.

I’d like to see more buying from Halfords directors before throwing myself into this one. But Halfords should be added to the watchlist.

Have a look at this article in todays FT. Sometimes director buying activity signals a market turn. I don’t have the data to prove it, but it is one of many indicators that could support a change in direction for stock markets.

‘Senior US company executives bought more shares than they sold last month for the first time in 13 years’……………. see FT article

I look also at directors buying activity by sector. I made what was a controversial call at the time, on the back of directors buying activity in the Real Estate sector (see entry of November 25th). Since then the sector is up 10%, and the FT All Share index down 2%, so a relative outperformance of 12%.

Since January 17th, when I highlighted directors buying outpacing selling, we have seen the Travel and Leisure sector outperforming the All Share by 7%, and the Construction and Materials sector by 2%. Early days I feel for these two.

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February 2008