You are currently browsing the monthly archive for October 2008.
Senior plc’s (SNR, 50p) trading statement gets a positive reception from the press, who point to both the low valuation but also the risk to orders from the ongoing Boeing strike:
Telegraph article: ‘Questor says Buy’. Times article :‘those with mettle should buy’.
The Directors of Senior however have been busy buying shares in the market.
- September 18th: CFO Simon Nicholls bought 5000 at 85p initiating a position.
- October 9th: Non exec Martin Clark (for Mrs Clark) bought 30,000 shares at 72.5p, taking their holding to 90,000 shares.
- 20th October: Non exec Michael Steel bought 20,000 at 40p initiating a position.
- 21st October: Non exec David Best bought 20,195 at 49.15p taking his holding to just over 40k.
- 21st October: David Ryan, a PDMR, bought 10,000 shares at 42.5p, initiating a position.
- 21st October: Simon Nicholls, CFO, averaged down by buying 15,000 shares at 46p taking his position to 20,000 shares.
So you can see what the directors of Senior think about their share price!!
Unfortunately these purchases don’t score as high as they might, despite having five directors /PDMRs buying shares and all initiating a position or increasing holdings by at least 50%.
I’d love to see more $$ committed to move this to a STRONG signal. The average purchase is less than GBP 10k.
View on Senior plc: Positive
Signal strength: MEDIUM (need to see greater cash commitment for this to be a Strong signal).
‘Cortisol is likely to rise in a market crash and, by increasing risk aversion, to exaggerate the market’s downward movement.’
I listened last night to an interview with Dr John Coates, a former Wall Street trader and the lead author of research published in April by the Judge Business School in Cambridge, analysing the impact of hormone levels (testosterone and cortisol) on traders performance and their ability to make judgements.
Coates goes on to say in the interview:
‘Cortisol, if you’re exposed to it chronically at high levels for a long period of time, it can have a devastating effect on both the mind and the body. In terms of affecting traders decisions what it can do is affect the memories you recall. You tend to recall bad memories, negative precedents. You tend to see risk where maybe there is none. You become fearful, you feel anxiety. I think that decreases a trader’s appetite for risk. While testosterone is causing people to take too much risk cortisol is causing people to take too little risk in the crash.’
I had also earlier read Tim Prices excellent weekly commentary ‘Diamonds amongst rubble’ suggesting that the [orchestrated?] inducement of large amounts of fear in all of us was necessary to get the financial rescue packages that the banks were looking for.
So are we all now dithering in overdoses of Cortisol induced by fear?
Can we no longer make rational decisions?
How long does it take to wear off?
Has the ‘market’s downward movement’ already been exaggerated?
People react in different ways to fear. Maybe we should worry less about the fear and more about balancing fear with opportunity.
Sources:
Judge Business School Press Release: ‘Testosterone levels predict City traders’ profitability. Research provides insight into irrational decision-making during crashes and bubbles.’
The Naked Scientist: Hormones and the Money Markets (access to interview transcript and podcast).
Tim Prices Blog: The Price of Everything.
Getting in touch with your feminine side: An interesting blog article discussing allegations of hormone management amongst traders at SAC Capital.
Premier Foods (PFD, 32.25p) share price has been in turmoil recently, over concerns that the group ‘faces challenges over reducing its £1.8 billion of debt’ (Telegraph article October 18th).
The group on Friday October 17th issued a statement aimed to calm concerns over the balance sheet:
‘Premier anticipates meeting its financial covenants at 31 December 2008. In current market conditions the Board is not pursuing any current plans to issue equity or equity linked products.’
Directors across the board followed up on the statement with share purchases (see regulatory announcement here) thereby sending a signal to the market that they meant what they said, and were prepared to commit their own funds to buy shares.
Directors and non execs bought 862,000 shares at around 32p, committing GBP 275k.
Are these purchases of value in stock selection?
Yes:
- 7 directors and 4 PDMRs have bought shares,
- Management have committed GBP 275k of their own cash
- Management have increased shareholdings by between 12% and 600%
No:
- The directors have a poor track record. They have been buying shares all the way down from 247p in September 2007.
I’m afraid the poor track record means that the share purchases do not warrant a ‘STRONG signal’ on the followthedirectors ‘significance of directors dealing’ scale.
View on Premier Foods: Positive- Directors buying
Significance of signal: MEDIUM strength.
September 12th: Simon Hope, Savills (SVS, 205p) Executive Director with responsibility for Capital Markets, sells 62283 Savills shares at 295p, taking his holding to 87,547 shares and raising GBP 183,797.
September 16th: followthedirectors comments: ‘Savills – further to fall – Directors sell’
October 17th : ‘Savills Says Earnings Will Miss Analysts’ Estimates’ (Bloomberg article) : ‘this year’s pretax profit will miss analysts’ estimates because of the slump in transactions caused by the credit-market turmoil.’
I know that in these markets five weeks is a lifetime, but do you not think the board of Savills have had regular discussions about the risk to their profits and earnings in their weekly board meetings?
If you had followed Savills directors dealings and the followthedirectors commentary, then this news would be no surprise to you.
Find below the performance you might have achieved if you had followed our commentary (I list here the dates of my comments, and the share price performance between them):
November 8th (followthedirectors say ‘don’t buy’). Performance to March 10th SVS down 5%
March 10th (‘results wednesday, watch out’) Performance to August 4th, SVS down 35% absolute, or down 13% relative to the FTSE 250.
August 4th (‘time to buy?‘) to September 12th, SVS up 33% absolute, or 32% relative, but Hope didn’t announce his sale until yesterday, so use August 4th to September 15th, SVS up 23% absolute, or up 25% relative.
September 16th (‘further to fall’) to today October 17th, SVS down 23%, but up 5% relative to the FTSE 250.
I would suggest that the risk in Savills remains distinctly on the downside.
For all comments on Savills click here or type Savills into the search box on the left.
When I wrote my post of September 15th ‘Hargreaves Lansdown- more selling, signal strength now STRONG’, I was unaware of the reason for so many share sales.
The reason directors of Hargreaves Lansdown (HL. 182p) have been selling is that this is the anniversary of their listing (see Citywire article here), and the lock up for part of their shares falls away.
This in my mind justifies the share sales as the directors are probably diversifying their financial assets. Although you might question whether they would all rush for the exit if there was good news ahead!
As a result of this I believe these sales have a lower value to investors, and I am moving the Signal strength indicator from STRONG signal to WEAK signal.
For all comments on Hargreaves Lansdown click here.
Thomas Cross (CFO) and David McFarlane (CFO) pretty much called the top on Dana in June this year when they exercised options to buy shares at 236p and 414p respectively, and then sold them at 1886p and 1881p respectively.
They took GBP 4 million and GBP 1.76m respectively out of Dana Petroleum (DNX, 1037p) within 5% of the high (1972p in May).
So it is interesting to see a whisper of positive news just this last week as two directors buy shares.
Brian Johnston, a non exec, on October 8th bought 6000 shares at 908p, inititaing a position in the company.
Two days later, on October 10th, Stuart Paton, the Technical and Commercial Director, bought 9179 shares at 894p, taking his position to 32,529 shares.
Between them they have committed GBP 137k to the company, which is minimal when compared with the money taken out by the CFO and CEO in June.
It is however an important signal to investors, which may establish a level of support for the shares.
Please also note that we have recently seen hesitant director purchases in other natural resources stocks including Xstrata, Cairn Energy, and Premier Oil.
View on Dana: Positive, Directors are buying shares
Strength of Signal: Medium
See comment of October 19th: Dana Petroleum – CEO invests at 853p having sold at 1886p in June.
followthedirectors... a study of directors share dealings 