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I am trying to find a good reason for Ian Russell, a non exec at Johnston Press (JPR, 12.25p), buying 800,000 shares at 12.25p, taking his holding to 815,000 shares.

All I can think of is that he sees the possibility/a chink/ a flicker of light at the end of the tunnel.

Johnston Press ‘currently operate 18 daily newspapers, 300 weekly newspapers and a huge range of related specialist, locally focussed, print publications. They operate 323 local websites to extend the content and reach of their print products (Company website).

As such Johnston Press is/has been hugely vulnerable to the economic dowturn. On November 12th in an Interim management Statement, Johnston revealed that in weeks 27-44 advertising in property was down 48%, employment 32%, motors 24%, and display 12%.

This is made worse by the huge leverage this group has, with net debt of GBP 465m at November 1st, thankfully down GBP 19m from June 30th (Company website, Interim Management Statement)

So why is Russell buying shares?

This is Ian Russells first significant purchase, but probably not a large % of his assets. Russell was appointed to the board in 2007, was formerly CEO and CFO of Scottish Power, as well as currently being an advisor to 3i (Company website).

Johnston Press shares have fallen from a high of above 350p in April 2007, and now represent option money to investors. It may be that Ian Russell believes they offer a risk worth taking.

The jury will remain out on Johnston until the half year results in August 2009 at the earliest.  But the shares certainly won’t be trading at 12 1/4p by then. They will either be worth nothing, or above a pound.

View on Johnston Press: Positive

Strength of Signal: Weak. Only one director buying, in limited size.

Addendum: Consumer confidence improves for the second month in a row (BBC article on GFK NOP study)

Intertek (ITRK, 815p) on the 17th December announced a very upbeat trading statement, ahead of their December year end: ‘the group is expected to end 2008 with strong trading….expected to continue into 2009’.

This was followed by ditrectors share purchases  as follows:

CEO Wolfgang Hauser initiated a position by buying 1336 shares at 742p,

Non exec Debra Rade trebled her holding by buying 1000 shares at 742p, and

Chief Operating Officer Mark Loughead bought 2500 shares at 775p taking his holding to 14,485 shares.

These are not significant $$ investments, but are a significant increase in shareholdings by three members of the board, and 2/3rds of the executive board.

View on Intertek: Positive

Strength of signal: Medium (would be Strong if the purchases were larger in $$ terms)

Intertek summary taken from the corporate website:


Intertek is a leading provider of quality and safety solutions serving a wide range of industries around the world.

Our services take us into almost every field imaginable, such as textiles, toys, electronics, building, heating, pharmaceuticals, petroleum, minerals, food and cargo scanning. We operate a global network of more than 1,000 laboratories and offices and over 23,000 people in 110 countries around the world.

Intertek helps customers to assess their products and commodities against a wide range of safety, regulatory, quality and performance standards. Our services include testing, certification, auditing, safety, inspection, quality assurance, evaluation, analytical, advisory, training, outsourcing, risk management, and security services.
Our customers include some of the world’s leading brands, major global and local companies and governments. Shell, Canon, McDonalds, BP, IKEA, Nestlé, ExxonMobil, LG, GAP Inc, Valero, Panasonic, Tesco, ChevronTexaco, Marks & Spencer and Levi Strauss are Intertek customers. More than twenty governments including Bangladesh, Mozambique, and Saudi Arabia are also customers.

In December last year I interpreted directors buying activity in Experian (EXPN, 425p) as a STRONG signal due to the number of directors buying, their positions in the group, and the amount of capital committed to the investment. (Followthedirectors December 10th: ‘Arredondo, non exec, adds to Experian holding’)

On Tuesday December 16th we saw the first significant share sales by a Non Executive Director of Experian, David Tyler. Tyler sold 100,000 shares at 413p (Source: London Stock Exchange).

I don’t know what that takes Tylers shareholding in Experian to, but due the significant $$ value I am using the directors share sale as a signal to close my positive view on Experian.

Experian in fact are back to their December 2007 levels, but the FTSE 100 has fallen by 35%.  So you have outperformed the FTSE 100 by 50%.

The signal isn’t yet of significant enough strength to warrant an outright sale on Experian.

View on Experian- Negative. Close positive view of December 10th due to director share sales.

Strength of Signal- Weak. Require more directors sales to justify a stronger signal.

To read all of  Followthedirector analysis of Experian click here.

From the last week of October to the first week of November the market rallyed by over 20%. Directors were actively buying, outnumbering sells by at least 5 to 1, a huge sentiment change given that the status quo for directors transactions is generally between 1 and 1 1/2 (buys) to 1 (sells). See October 30th ‘Directors ARE buying shares’

So what happened in November?

 Directors interest waned, and the ratio of buys to sells dropped from above 5 in October to around 2.75 in November (source : This is still a hugely positive number. But anecdotally, looking at recent directors transactions, the level of activity in December has fallen away, probably in line with general stock market activity given what my friends in the industry have been telling me.

Fear not though. In late 2002 early 2003 it took almost eight months for early directors buying signals (4:1 buys to sells in August 2002) to result in a convincing change in direction for the market.

We experienced ratios of 4:1 (August ’02), followed by 3:1, 1.5:1, 2:1, 5:1 (December ’02), 1.5:1, 2:1, 2:1 (March) before the market started to turn. (source: Digitallook).

What I suppose I am suggesting is that the 5:1 signal of October is the beginning of the end. You’ll probably see 2-4 significant market setbacks, accompanied by Directors buying activity, before the wider market builds up confidence.

You want me to put a date on it? Why not. Nobody else out there has a clue what’s going on.

Put your money to work in Equities between now and Easter, and be prepared (or don’t be surprised by) to take advantage of a further 20% fall in the market before then.

Savills update:

There is no new news at Savills (SVS, 252p), save improving sentiment on UK rate cuts, which has resulted in great share performance (up 16% re FTSE 250 since Savills director Simon Hope sold shares on September 12th, and up 14% relative to the market since the group announced a profit warning on October 17th).

I do however expect a pre close statement from Savills next week, as the ‘Interim Management Statement’ [Profit warning] of October 17th was related to ‘recent weeks ….transaction volumes’, and two months in this market is a long time.

The other risk that arises comes from the ‘stepping down’ of the Finance Director Mark Dearsley, in what must be financially pretty stressful times for a business geared to transaction volumes. ‘His exit will mark the second departure from Savills this year and comes just weeks after the company issued a profit warning’ (Reuters November 26th).

So I stick to my guns on Savills, noting that four directors have sold shares between 295p and 359p this year, and that the risks remain on the downside.

For all previous comments on Savills on this website, including directors share sales and the profit warning, click here.

View on Savills – remains negative

Strength of Signal- Remains STRONG

wglThe CFO of John Wood Group plc (WG. , 185p), Alan Semple, yesterday bought 50,000 shares at 166p, taking his holding to 1.164m shares.

Whilst this of itself is not significant, there are a few factors which continue to support a positive view on John Wood :

  1. Semple sold 92,000 shares in April this year at 453p. This is his first transaction since then.
  2. Sir Ian Wood, Chairman, also invested in John Wood last week, buying 500,000 shares at 164p on December 5th, taking his holding to 31.1m beneficial and 60m non beneficial.
  3. Six other directors have bought shares, in October. In total 8 directors have bought 1.296m shares in the last six weeks, investing over GBP 2m between them.
  4. The ‘Full year trading update’ is to be announced on the 17th of December.

Our last comment on John Wood Group was on October 28th at 179p ‘Four directors have invested over GBP 1m in the last week’. Within a week John Wood shares were trading 100p higher, helped by a big bear market rally.

I expect a positive, reassuring statement next week.

Positive view, encouraged by a STRONG signal.

Sources: Company website, London Stock Exchange, Digitallook

There are many reasons directors buy and sell shares. It is finding a pattern and a track record that is key to working out whether the directors dealings you witness have any validity as a signal for investors.

I noticed some buying of BHP (BLT, 1191p) a week ago, on December 1st  by Mr A Mackenzie, who is a ‘Group Executive, CEO non Ferrous’. This was followed by  further purchases on December 3rd, 4th and 5th, amounting in total to 55,000 shares, an investment of around GBP 500k.

Mackenzie was accompanied by a Mr K Rumble, another Director of BHP, who invested about GBP 50k on December 3rd.

Looking through the BHP corporate website, I discovered that both Mackenzie and Rumble had recently been given Group Director or Executive positions, Mackenzie when he joined from RTZ in November, and Rumble in September.

BHP are very good at corporate disclosure, showing full details of their numerous Long Term Investment Plans and Share Plans on the group website.

It seems from the details of these plans, that in order to be eligible for the Group Long Term Incentive Plan, senior directors are ‘subject to a minimum shareholding requirement’ (Source : BHP Group website).

This would suggest that Mackenzie and Rumble have been buying shares in order to join the Incentive Plan, not because the shares have upside here.

I’ve just this minute been going through yesterdays regulatory announcements on the London Stock Exchange, and I find that, lo and behold, Mr A Mackenzie has been granted 225,000 ‘Performance Shares’ as part of the Long Term Incentive Plan, as well as a further 100,000 ‘Performance Shares’ as compensation for forfeited incentive awards at his previous employment (Awards granted Dec 4th, announced Dec 9th 15.28- Source London Stock Exchange). Worth him buying those 55,000 shares then!

Risks to Miners (my view):

The Australian pointed out earlier this week that the ‘China Iron and Steel Association…. wants 2008 agreements to terminate three months earlier than scheduled’. Not a good start to 2009 contract negotiations.  I guess RTZ are fully aware of the levels of volume and price the Chinese are looking for, hence their layoffs announced today.

We first heard of the Chinese delaying iron ore shipments as long ago as October 12th (see post on Mt Gibson, HSBC, China here).

It could be that when the broader market becomes more aware of the lack of growth/downturn in China in 2009, we may see another setback in equity markets, especially those with high input exposure to China.

No reason to buy BHP or RTZ quite yet.

On November 19th Melrose plc (MRO, 78p) reassured investors with an Interim Trading Statement saying that ‘trading is in line with expectations’ and ‘the integration of FKI is ahead of plan’.

So good news. This was supported by director buying on the 19th and 25th of November by four directors who between them bought over 1.3m shares at between 63p and 64.9p.

The three executive directors (Miller Exec Chairman, Roper CEO and peckham COO) increased their positions by an average of 11%.

Non exec John Grant effectively initiated a position by buying 153,000 shares, taking his holding to 164,000 shares.

My thoughts?

Definitely one for the watch list. Positive due to four directors buying, decent $$ amount, but not a STRONG signal due to limited % increase in holdings. Next news is unlikely to be until early March, when full year results to end December will be announced.

Look for further director share buying this month, before the ‘window’ for directors dealing activity closes. This could cause us to reinforce our positive view on Melrose.

Another engineer with directors buying shares. See here for all comments on the UK Engineering sector.

View on Melrose plc: Positive- Four Directors buying.

Strength of Signal: MEDIUM- Insufficient % increase in holdings to warrant a Strong view, Four directors buying, Good $$ committed.

Sources: London Stock Exchange, Digitallook

Mr Howard Covington
Chief Executive
New Star Asset Management Ltd
1 Knightsbridge Green
4th December 2008

Dear Mr Covington,

I’m at a loss to understand several actions of New Star Asset Management Ltd’s management over the last 18 months. Namely the following:

1. Why did New Star leverage the balance sheet through a cash distribution of GBP 363 million, resulting in greater risk for shareholders, when your own leading indicator pointed to increased risk of an economic slowdown or even a recession?

‘..New Star’s leading indicator of global monetary conditions turning negative. This indicator ……has turned negative before the 10 downswings within the G7 since 1965- either economic growth slowdowns or full-blown recessions’   (John Jay- Director, New Star Asset Management, Newsletter ‘Investment Star January 2007’).

2. Why did New Stars directors not address the cost issue earlier, in view of the concerns over corporate indebtedness expressed by your own fund managers?

Jamie Allsop, Hidden value Fund Manager: ‘Companies with high levels of debt or leverage are going to find it difficult as interest rates rise further’

Richard Lewis, New Star European Leaders Fund Manager: ‘Higher bond yields and tightening credit markets are posing a challenge to financials and highly indebted companies, and the fund has being avoiding them’.

Theodora Zemek, Fixed Interest Fund Manager:‘The fund … was structured to reflect awareness that the economic cycle was maturing. Positions were, therefore, taken in more senior bonds issued by companies with reliable earnings and balance sheets that were not aggressively leveraged’. (All quotes are from the July 2007 New Star newsletter ‘Investment Star July 2007’)

3. Why did New Star Management fail to explain to shareholders the risks to the business of falling revenues and a high level of debt? The issue of a high level of debt within the business wasn’t highlighted by management until November 14th.

29th August 2008 John Duffield, Chairman, says in the Interim Results to June 30th:

“As expected, the first half of 2008 was a difficult period for New Star. The trading environment remains difficult and we do not expect conditions to improve in the immediate future.

“We remain confident that through a combination of investment performance, marketing and service we can return over the medium term to generating significant value for our shareholders. We believe the long-term outlook for our company is good.” [my bold]

No comment on debt at New Star except this: ‘As we signalled in January, we intend to continue using our cashflow principally to reduce further our net debt, which had been reduced to £241 million by the end of June.’ (Source- Company website)

14th November 2008. Interim Management Statement [debt issue moves up the agenda]

‘New Star has agreed with its bank syndicate that the financial covenants in respect of its debt should be amended to better accommodate the current unsettled trading environment. This amendment has immediate effect. As a consequence of the amendment the interest rate on New Star’s debt has increased by 1.5%. The debt remains repayable in a single payment in June 2013. New Star has not at any time been in breach of its financial covenants.’

‘Our banks understand our position and are supportive.'( Source- Company website)

21st November 2008. Company announcement on Reorganisation [only a week after Interim Management Statement debt issue now top of the agenda]

‘We announced in our interim management statement that we had successfully negotiated with our banks to amend our banking covenants. This was an important and positive step forward for our company. Following that announcement we are moving swiftly to restructure our fund management activities in response to the bear market and to specific areas of underperformance’. [this relates to fund performance, not something that can be changed overnight, but will take months and years to resurrect]

3rd December 2008. Company announces Capital Restructuring

‘New Star announces a proposed Restructuring that will result in £240 million of its £260 million of gross debt being converted into equity .

New Star currently has £30 million of cash so that, if the Restructuring were effective today, New Star would be left with net cash.

New Star’s bank syndicate will own 75% of New Star’s enlarged fully diluted ordinary share capital and £94 million out of £100 million of new convertible redeemable preference shares to be issued by New Star.

New Star intends to de-list as part of the Restructuring’ [sorry shareholders, you’ve been screwed]

4. Mr Covington, why on September 9th 2008 did you sell 2 million shares at 100.6651p, more than 40% of your holding, leaving you with 2.8m shares (Source: London Stock Exchange, Digitallook). Do you think Mr Duffields statement of August 29th (above) was overly bullish, and not reflecting the true risks at New Star Asset Management?

I look forward to your response.


Simon Winfield


This is the man who called the Stagecoach (SGC 140p) share price absolutely right. Yes, that’s right, the CFO Martin Griffiths.

Since July 24th (see copy of note below) Stagecoach shares have halved in price, and are down 37% relative to the FTSE 100.

Following the recent results (‘Stagecoach to cut jobs as recession looms’– Bloomberg) I am closing my negative call with a 51% absolute return.

Can I point out to shareholders that on October 29th the company announced in their Trading Statement that ‘the outlook for the Group remains positive’ (Source Stagecoach Group website).

I might be so bold to suggest that Mr Griffiths ‘outlook’ expectation must have differed substantially from the markets interpretation of a ‘positive outlook’, and that Stagecoach failed to acknowledge and relay this difference to the market in an appropriate way. Why else would Stagecoach’s share price be down 32% since the October 29th Trading Statement?

But Griffiths’ real skill was selling shares on the realisation that things couldn’t get any better. People switching to public transport, fuel prices starting to come down, premium valuation due to ‘non cyclicality’ of the business.

Addendum Friday December 5th: Stagecoach yesterday announced two share purchases by directors as follows:

Non exec Sir George Mathewson (of Scottish banking fame) bought 35,000 shares at 139.39p on December 4th, initiating a holding.

CEO Brian Souter bought 2.085m shares at 138.96p on December 3rd, taking his holding to 106 million shares.

These purchases do not yet warrant a positive view on the stock, as in % terms Souters is too small as a proprtion of his existing position, and Mathewsons position as a proportion of his net wealth must be assumed to be very small. Note of July 24th 2008:

Stagecoach – CFO Griffiths thinks it’s time to take profits

Martin Griffiths, CFO of Stagecoach (SGC 275p) is taking his money off the table.

As at the beginning of June he held Executive Share Options over 479,000 shares, with varying exercise periods, starting in June and December 2006 and December 2007, and extending mostly to June 2010, with some as far out as December 2011 (Annual report).

Griffiths exercised all 479,000 between 26th of June and 8th July this year, which cost him £365k.

He sold all of them them on the same dates, realising £1379k, a net £1m in his pocket.

Why do I think this significant?

  • He had another 2-3 years before he needed to exercise these options, but chose to exercise and sell now.
  • This 479,000 shares is the total amount in his Executive Share Option pot*. Griffiths today owns less than 20,000 shares.
  • When exercising options, directors usually sell sufficient to pay the tax man and hold on to the rest. Not in Griffiths case. He has exercised and sold the lot.

Griffiths behaviour and the subsequent risk profile of his remaining ‘Plan’ shares indicates to me that the risks to the Stagecoach shares outweigh the medium term returns. So I’d follow Griffiths and take some money off the table too.’

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December 2008