You are currently browsing the daily archive for May 9, 2008.

I’m going to start to look more closely at using recent director dealing activity as a signal ahead of news. (I’m unsure about the reliability of what is essentially a long term signal being used as a forecast for short term movements in share prices. We’ll see how it goes shall we.)

All stocks listed below have news out next week.

All these stocks have seen director dealing activity which I have commented on. Click on the stock ticker to take you to the comment(s).

My favourite pick for positive feedback from an analysts visit is MISYS.

ENO neutral bid situation. Interims 13/5

ARM warm already had +ve Q1 on 29/4. AGM 13/5

CPG warm already had +ve trading update 27/3. Interims 14/5

MSY POSITIVE CEO, CFO, COO increased positions by 14%/50%/60% in late March. Analyst visit 14/5

AMEC POSITIVE CEO increased position by 50% spending £500k in April. AGM 14/5

CKSN POSITIVE CFO and CEO increased positions by 90% and 45% mid March. Trading Statement 15/5

III warm CEO Rea bought £500k on March 4th. Prelims 15/5

GFRM neutral already had trading update 1/5. AGM 16/5

All news dates are taken from Google Finance. They have not been verified with the companies themselves.

There is not a lot to add on Smith and Nephew (SN. 552p).

Poor results due to problems integrating a recent acquisition, as well as questionmarks over accounting of sales at the acquisition, resulted in a 14% drop in share price on May 1st.

John Buchanan (Chairman) bought 35,000 shares at 568p on May 2nd.

David Illingworth (Chief Operating Officer) bought 13,500 shares at 572p on the same day.

These are credible, but not strong, signals. Buchanan increased his position by around 25% and Illingworth by 15%. I’d prefer to see more buying by these two, or by other board directors, before following them in myself.

Iain Paterson, the non exec Chairman of ITE Group PLC (ITE, 150p) in March sold nearly all his share 243,000, at 141p (would this be for tax reasons?).

He has now started to buy them back, investing £71k on May 1st (bought 50,000 shares at 142.5p) and £74k on May 6th (50,000 shares at 148.3p). He now owns 148,000 shares.

ITE is an organiser of trade exhibitions and conferences. Think Russia, Oil, Gas – all highly cashed up growth areas. So do you expect a good set of interim results on May 19th? I bet Paterson does.

‘FSA targets insider trading deals’- BBC News May 6

Dear Hector,

I believe legitimate trading by company directors in their own shares to be a valuable source of information for the market as a whole. It has been shown widely that following ‘company insiders’ enables an investor to outperform the  wider market. The information detailing those trades is quite rightly publicly available, enabling you or I to make our own decisions regarding its validity.

I believe that in the vast majority of cases where company insiders trade ahead of results or other corporate information they are ignorant of the FSA guidelines and stock exchange rules on directors dealings.

So Hector before you beef up your police force, if that is what you are doing, spend more time on educating company directors on the rights and wrongs of directors dealings. It will be a lot cheaper than investigating and taking cases to court.

I think however that when the press refers to your comments on insider trading they really mean ‘informed price movements ahead of merger and acquisition (M&A) announcements’ as per your newsletter of April 29th 2008 (see link here).

This is solely concerned with undisclosed trades made by individuals with knowledge of forthcoming M&A activity. Very very few disclosed directors dealings are of this nature.

In the protection of individual investors, and for the credibility of the London markets, I therefore fully support an ongoing vigilance over this form of market abuse.


Simon Winfield

For other commentary see also the following:

Michael Gibersons of Knowledge Problem : ‘Would making insider trading restrictions optional for corporations suffice? and ‘Overview of Henry Manne’s ”Insider trading, Virtual Markets, and the Dog that Did Not Bark”

Chris Dillow at Stumbling and Mumbling: ‘Legalize Insider trading’

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May 2008