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I’m not talking about the big cap FTSE 100 stocks here, but smaller FTSE 250 companies that are the global leaders in their field of specialty engineering.

Many of these companies have grown from a UK engineering base to have globally spread customers. They may also be companies with less near term economic exposure, protected by longer lead times, and also big beneficiaries of a weak Sterling.

It is unusual to see so many companies in one sector showing directors purchases, most of which have occurred in the last ten days. The directors clearly think trading conditions are better than those indicated by the share valuations in the stockmarket.

Weir Group (WEIR, 295p) : Three directors have invested GBP 350k in last two months.

Provider of engineering solutions (pumps, valves, pipelines, maintenance etc) to the mining, oil and gas, and power generation markets worldwide.

10x Half year 2008 operating cash flow. GBP 620m mkt cap.

Senior plc (SNR, 42.5p): : Six directors have invested GBP 70k in last two months.

Senior designs, manufactures and markets high technology components and systems for the principal original equipment producers in the worldwide civil aerospace, defence, diesel engine, exhaust system and energy markets.

6.8x Half year 2008 free cash flow. GBP 170m mkt cap.

IMI plc (IMI, 269p) : Three directors have invested around GBP 80k in last two months. 

IMI is an international engineering company, which operates primarily in the fluid controls and retail dispense areas. Fluid controls covers pneumatics, severe service valves and indoor climate products and services, while retail dispense includes beverage dispense and merchandising systems.
13.4x Half year 2008 operating cash flow. GBP 860m mkt cap.
John Wood Group plc (WG., 179p) : Four directors have invested over GBP 1m in the last week.
The international energy services company provides the oil and gas and power generation industries with engineering design, production support and industrial gas turbine services.
10.7x Half year  2008 operating cash flow. GBP 950m mkt cap (in FTSE 100, not FTSE 250).
Bodycote plc (BOY, 122p): Five directors have invested GBP 400,000 in last two months.
‘Bodycote is the world’s largest and most respected provider of testing and thermal processing services: Heat Treating, Hot Isostatic Pressing, Metallurgical Coatings and Testing – operating in 30 countries’ (strategy page on co website).

13.8x First half 2008 operating cash flow. GBP 400m mkt cap.

Read ‘Can Sulzer come back and bid for Bodycote? Ask the directors’  published at followthedirectors October 28th 2008.

Laird plc (LRD, 153p): Four directors have invested around GBP 70k in the last week.

Laird plc‘provide technology for an increasingly connected world’ in the form of  Electronic Components and Antennae enabling wireless connectivity (see co website for the lowdown).

10x First half 2008 operating cash flow. GBP 280m mkt cap.

Read: ‘Confident Laird directors delve into their pockets’ October 28th 2008 followthedirectors.

 

Disclosure: I have positions in Bodycote and Laird

Information sources: Company websites and London Stock Exchange.

‘Bodycote (BOY, 118p) is the world’s largest and most respected provider of testing and thermal processing services: Heat Treating, Hot Isostatic Pressing, Metallurgical Coatings and Testing – operating in 30 countries’ (strategy page on co website).

Four directors have bought shares in the last two months, and the CEO has exercised options over 148,000 shares (at a premium to todays price).

Between them and a PDMR they have bought around 132,000 shares in the market, and 148,000 shares via the options (CEO), investing over GBP 400k. Purchases and options exercises have been made between 114.88p and 206p over September and October 2008 (source: London Stock Exchange Market News website, type in BOY for all Bodycote news)

Why?

April 2007: Bodycote rejects fourth takeover bid from Sulzer (Times 20th April 2007) (stock reached high of 325p in March 2007)

October 2008: Bodycote announces completion of sale of Testing business for GBP 417m (October 17th 2008, company website)

Today: Bodycote shares now trading at 118p and have a market cap of GBP 380m.

Do you think Sulzer might come back for Bodycote? I don’t know Sulzers strategy or their financial position. Maybe you should ask somebody that does. But the directors clearly believe, as shown by their actions, that Bodycote shares are cheap.

View on Bodycote: Positive- Directors buying

Strength of Signal: Very STRONG. 5 out of 6 directors buying shares, significant $$ investment, company has a history of bid activity.

See also ’25 directors buy shares in UK engineering companies’ (October 28th followthedirectors.co.uk)

Laird plc (LRD, 150p) ‘provide technology for an increasingly connected world’ in the form of  Electronic Components and Antennae enabling wireless connectivity (see co website for the lowdown).

They last declared results at the end of July for the June half year, showing an operating cash flow of GBP 28m for the half year (or GBP 12.9m after tax and financing). For a company with a market cap of GBP 270m that looks pretty good (co slide presentation here).

On October 21st Laird issued an interim management statement, the key points of which we saw as ‘we continue to match our direct labour to changes in demand’ and ‘Laird remains extremely strong with low financial gearing and double-digit interest cover’ (full statement here).

In March the executive directors Hill, Silver and Rapp all exercised options and sold roughly the required amount to pay tax, at 494p per share.

In the last week four directors , including Peter Hill (CEO) and Jonathan Silver (CFO) above have been buying shares as follows (source London Stock Exchange):

22nd October :

Christopher Hum, non exec, buys 1512 shares at 161.675p per share taking his holding to 3000 shares.

Jonathan Silver, CFO, buys 20,000 shares at 167p per share, taking his holding to 210,000 shares

23rd October:

Peter Hill buys 18,000 shares at 156.36p, taking his holding to 200,000 shares, and finally

24th October:

AJ Reading, non exec, buys 3000 shares at 147.25p per share, taking his holding to 15,000 shares.

What do we think?

1. Four directors buying shares, mix of non exec and exec, shows confidence in the current half year performance of the group.

2. The size of purchases is however in three cases only 10-20%. I’d love to see a greater commitment.

3. Buying in times of huge uncertainty in the market is worth more to us as a signal than buying in stable times.

View on Laird: Positive- four directors buying

Significance of purchase: High/Strong– four directors buying in times of turmoil, four months into the half year.

See also ’25 directors buy shares in UK engineering companies’  (October 28th followthedirectors.co.uk)

 

 

 

 

 

 

 

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