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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.

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