It seems to me as if Savills (SVS, 266p) are almost a second derivative on the UK housing market. Not only are there huge swings in sentiment on housing, but these seem to play out with greater amplitude in the Savills share price.

Of course Lehmans demise will impact the London housing market. Not only by Lehman redundancies, but also having all those other banks not paying bonuses for a couple of years: ‘you’re lucky to have a job, son’.

Savills directors dealings seem to be a pretty good indicator (or maybe influence) on the share price.

Simon Hope on Friday sold 62283 shares at 295p, taking his holding to 87,547 shares.

I’ve commented on him before (links to comments in blue), so let’s look at how the share price coincides with Directors activity in the sector, and my comments:

November 8th 2007: Hope sold GBP 350k (net of options exercise) of shares at 353p. I said Housebuilders- too early to buy.

March 10th 2008. I highlighted the ‘risk’ inherent in Savills shares ahead of results, using Hopes share sale in November as an indicator, by saying Savills up 50% this year, results Wednesday. Watch out.

August 4th 2008. We saw directors (Sir John Ritblat and CEO Izett) buying at Colliers Re, also in the agency/property management sector. As a result I said Real Estate agents – time to buy?

Now let’s look at the value of using these directors dealings as a signal for investors. I list here the dates of my comments, and the share price performance between them:

November 8th to March 10th SVS down 5%

March 10th to August 4th, SVS down 35% absolute, or down 13% relative to the FTSE 250.

August 4th to September 12th, SVS up 33% absolute, or 32% relative, but Hope didn’t announce his sale until yesterday, so

August 4th to September 15th, SVS up 23% absolute, or up 25% relative.

So what is the downside risk in Savills today then, and can this string of successful calls be repeated?

Between August 4th and today, Savills are up roughly 30% relative to Colliers Re. If you look at a longer term chart of these two stocks, they more or less perform in line with each other. Colliers is a little slower to move due to its illiquidity. So that’s what I think the scale of the downside risk is in Savills.

Also note that Savills have a pretty heavy cost base with 17,000 employees, versus Lehmans 28,000.

Value of Directors Dealings as a signal to investors: STRONG

Link to all my previous comments on Savills here.