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I commented the other day that I believed eaga (EAGA, 124p) to be unloved, unknown and out of favour, but with directors buying prompting a ‘look again’ signal for investors (see post here).

Then I see that two days ago, Mark Tincknell, the Executive Chairman of Connaught (CNT, 396p) had been selling down his position in his company. He has sold 2 1/4 million shares, almost a third of his position, at 375p, to leave him with 1.3 million shares.

There are a couple of quotes I find rather amusing in the press release, namely that he sold shares ‘to satisfy institutional demand’. Well somebody had to be on the other side of the trade didn’t they !!

And then the release goes on to state that Mr Tincknell is extremely positive about the future prospects of the company’. That may well be the case. But the fact that he is selling such a huge slug of his holding may also indicate that Mr Tincknell thinks that those future prospects are already discounted in the share price.

I know little of these companies save what I read on their websites. These lines are taken from their company overview pages:

Connaught: ‘Our Social Housing division has a community focus, fixing, maintaining and cleaning homes and neighbourhoods for local authorities and social landlords, and is one of the most highly respected players in the national social housing landscape. Our Compliance division specialises in gas, electric, water and fire compliance, and provides full health and safety and business risk assessments.’

eaga:A leading provider of residential energy efficiency measures for utility companies under the Energy Efficiency Commitment (EEC), and a large and rapidly growing supplier into the social housing sector.’

I see a similarity in customer bases, but with a slightly differing product.
Then I look at the financial data as provided by

Company: …………………………………………Connaught ……………eaga

Mkt cap £m ………………………………………485 ……………………..306

Turnover £m ……………………………………..400 …………………….482 (both last reported finl year)

Net cash flow from operating activities £m 9.75 …………………33 (both last reported finl year)

Share price ………………………………………. 396p …………………..124p

eps (last reported finl year/forecast) … 12.2p/17p ……………12.27p/10.6p

And I leave you to make your own conclusions. All I can add is that this would be a long term trade, as it will take 2+ sets of results by eaga to change investors opinions.

I’m intrigued.

Galiform (GFRM, 71p) own Howdens Joinery, which supplies kitchens and joinery products to the building trade.

In a week of turmoil in the UK housebuilding industry prompted by Persimmon warning they would stop building new homes, I find that the CFO of Galiform, Mark Robson, makes his first purchase of shares since he joined the board in 2005.

Robson on April 15th bought 132,000 shares at 77 1/2 p, investing £102,000.

As a result Galiform goes on the watch list.

Addendum May 1st : I’m no longer intrigued. Stock is up 7% today on results better than the market anticipated. See reuters comment here.

A Howdens Joinery kitchen

eaga (EAGA, 135p) is a little understood company. It is more than 51% owned by its employees and directors, is trading below it’s IPO price of 181p, and its activities encompass something investors have little experience in, namely working with social housing providers and utilities in the replacement of heating systems.

The shares recently ‘collapsed’ from 200p at the end of February, to 135p now, on the back of an interim report pointing to cost squeezes and demand delays.

In January all the executive directors bought stock, at around 150p. I ignored this signal because the size of the purchases relative to the existing holdings were at 1% irrelevant.

But Malcolm Simpson, a non executive director of eaga, then increased his holding by 45%, investing £38,000. Last week he invested a further £40,000 by buying 30,000 shares at 133p, taking him to 88,000 shares.

And this week Dave Routledge, an Executive Director, has invested £99,000, buying 75,000 shares at 132p. In the context of Mr Routledges pay (£231,000- source: annual report 2007), his investment of £200,000 since January should be seen as significant.

I believe that eaga shares are underheld and the company unknown by UK investment institutions, and that therefore the information on directors dealings as highlighted above is significant.

Also see April 30th post on eaga and Connaught here.

I’m back from a weeks camping holiday with the family to find a whole load of share dealings by UK directors, but nothing hugely inspiring. Most of the ‘regulatory news reports’ issued by companies relate to directors exercising options granted as part of their pay, and selling sufficient shares to raise cash with which to pay the tax man.

In the case of AMEC (AMEC, 752p) I find that CFO Stuart Siddall exercised options on 200,000 shares, and sold them all (April 4th 2008). He has done this before, so this isn’t a change in behaviour. He owns now only 30,000 shares in AMEC, maybe more if you count share awards in the pipeline as options still to be exercised and realised. Maybe he is just a conservative investor.

Now lets look at Samir Brikho, appointed CEO in October 2006. He has about 1m shares in the pipeline, in the ‘Performance Share Plan 2006 and 2002’. Yet he has been buying more. On the 7th April he bought 16,000 shares at 718p, and on the 24th April 50,000 shares at 742p, taking him to 182,000 shares (excluding the unexercised options or shares mentioned above).

Is this significant? I’d say yes. Brikho has spent £483,000 and increased his position in AMEC by 50%.

The caveat on this call is that I don’t have a share transaction track record to look back at, and also that share ownership by the directors of AMEC is currently pretty limited in the number of directors (only 3). But I suspect that is about to change.

This is an update on two strong calls.

‘Strong’ because of the extent (number of directors) and size (as % of previously held positions) of director buying.

Severfield Rowen (SFR, 331p) have announced that John Featherstone, a non exec director, has sold almost all his shares, realising £387,000.

This in itself is not a strong sell call, but may signal an opportunity to take profits. SFR are up 26% absolute, and up 25% relative to the FTSE 250 since the original buy signal on January 31st (see the post here).

Enodis (ENO, 224p) yesterday announced an approach from Manitowoc (MTW), possibly as high as 260p (see news here) . In November senior directors bought shares between 166p and 186p. See original post of December 2nd here. Since then Enodis are up 30% absolute, or up 37% relative to the FTSE250.

A mail from John Mauldin has just hit my inbox. He picks up on a comment by Soc Gen showing that analysts are always behind the curve when it comes to earnings forecasts (did you know this?). He goes on to conclude that the likely fall in company earnings this recession is nowhere near being discounted by the share market (see article ‘Asleep at the wheel’).

I’ve borrowed from the newsletter an interesting slide summarising a recent Duke University CFO survey which strengthens my argument for watching directors behaviour, in preference to listening to what they say. Notably that

..CFOs are around 57% optimistic about the economy…., but are 68% optimistic about the outlook for their own firms!’

Duke University CFO Survey

There’s a plethora of information about directors share dealings in Cairn Energy ( CNE, 2915p) last week.

If you filter out the sales by executive directors of shares released under the Long Term Incentive Plan, and eliminate shareholdings sold and bought back before CGT changes, you are left with four notable changes in holdings:

1. CEO Sir Bill Gammall has sold 50,000 shares taking his holding to 377,000 shares.

2. Exploration Director Dr Mike Watts sold 40,000 shares taking his holding to 160,000 shares.

In my mind both of the above sales are interesting but not hugely significant.

Of greater interest are the sales by Non Executive Directors as follows:

Norman Murray- Cairn Energy Chairman

3. Non executive Chairman Norman Murray halves his holding by selling 40,000 shares at £28.61, releasing £1.1m, and

4. Non executive Director Todd Hart reduces his holding by more than a third, selling 10,000 shares to leave him with 18,000.

I believe these sales to be significant, both in value terms, and as a proportion of the directors’ position (holding) in Cairn prior to the sales.


Since six directors of Severfield Rowen (SFR, 320p) piled into the stock in January taking advantage of a collapse in the share price, the stock is up 30% both on an absolute basis, and against the FTSE Small Cap index.

Results yesterday (see Tempus comment here), accompanied by more director buying, have sent the stock higher again today. Non exec David Ridley bought 20,000 shares yesterday at 306p, taking his holding to 72,000 shares.

The purpose of this post is to remind you of the strength of the signal that the directors sent to the market back in January (see post here), so that next time it happens both you and I will pay closer attention.

6 directors (out of a board of 11) had increased their holdings by between 50% and 200%!!

Paul Walsh

I see Paul Walsh, CEO of Diageo (DGE 1055p) has sold just under a million pounds of shares, resulting from an options exercise the same day.

Looking back, he always sells pretty much all the shares he receives as a result of exercising his options, not just a portion sufficient to pay the tax, so behaviourally this is no change from previous sales.

What I did notice though is that he has been very clever at hitting all the peaks in the Diageo share price chart over the last two years.

To best see this, go to, search for diageo, draw a chart, and overlay directors dealings.

The chances are that he’s done it again this time, and 1055p may well be the recent peak of Diageo for a few months.

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April 2008