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Seven directors of Burberry (BRBY, 229p) bought shares in November after the group warned of ‘tough conditions going into Christmas’.
Results today show like for like sales down only 3%, and an expansion of the cost cutting plan by an additional GBP 30-35m (Burberry Third Quarter trading statement here).
The shares have bounced sharply in relief today that trading over Christmas wasn’t as bad as the market had been anticipating.
So who did you listen to, the scary ‘tough conditions statement’ or the directors ?
Did you pay attention to the words or the actions?
Burberry shares are now up more than 35% since our comment on November 24th (STRONG signal, Positive view, see ‘Burberry Check’), and have outperformed the FTSE 250 index by over 20%.
Take profits.
Over a year ago, in December 2007, the CFO of Next (NXT, 1150p) increased his holding by
8%, investing GBP 170k at 1711p. I didn’t view this as a strong signal, as he was a solo buyer, unaccompanied by other directors, and increasing his holding by less than 8% (followthedirectors: ‘Next- Keen but not yet convinced’). Over the next six months Next underperformed the market by about a third.
What I missed in July 2008 was the turning point for Next. Three directors (Chairman Barton, CFO Keens, and Non exec Dawson all bought shares, investing between GBP 16,000 and 37,000 each. I missed it due to the low $$ value of each transaction. It missed my screen. Next duly outperformed the market by over 70% between July and now.
Last week Andrew Varley, the Group Property Director, sold 10,000 shares at 1234p taking his holding to below 70,000 shares (Source: London Stock Exchange). I do think this sale is significant: Varley has been on the board of Next for 18 years, the sale value is more than the combined purchase value of Keens, Dawson and Barton.
View on Next: Negative
Strength of signal: Medium
Barratt (BDEV, 80.25p) directors have been actively buying into the group since November, initiating or significantly increasing their personal holdings as follows (Source: London Stock Exchange):
- November 18th Robert Lawson, Non exec Chairman, bought 151,000 shares at 65.3p, and now holds the same amount.
- November 20th Mark Rolfe, Non exec director, bought 30,000 shares at 62p, and now holds the same amount.
- December 19th Mark Clare, CEO, bought 357,000 at 69p, taking his holding to 529,000 shares.
- December 19th Mark Pain, CFO, bought 60,000 at 74.8p, taking his holding to 100,000 shares.
- December 23rd Stephen Boyes, Executive Director, bought 65,000 shares at 76.4p, taking his position to 107,000 shares.
Between them these directors have invested GBP 450k, at a time of great uncertainty in both the stock and property markets.
Barratt have however impressed the market with recent results, showing an impressive ability to generate cash and pay down debt, as well as reduce costs by shedding 60% of their employees.
The group today warned of margins being squeezed, and therefore unlikely to meet brokers estimates [ which is probably near term and pretty irrelevant to the long term viability of this business] (FT article).
What matters with this group is that directors are actively buying, and they appear to be managing the economic problems quickly and positively.
On November 8th 2007 (‘Housebuilders- too early to buy’), with Barratt above 500p, we warned of downside in the sector as a result of seeing significant directors share sales at Savills. I’m happy now to be looking for opportunities to invest in Barratt for the longer term below 75p.
View on Barratt Developments: Positive
Strength of signal: Strong (caveat: must be viewed long term ).
Back in August last year, we noticed that despite excitement over a potential bid for Liberty International (LII, 522p), senior management in the form of a Harold Newton was selling shares. Unusual behaviour if you think there could soon be a bid on the table (see August 31st ‘Liberty International- PDMR selling’).
Since our caution, Liberty International have underperformed the Real Estate sector by around 20%, and the FTSE 100 by over 30%.
We believe Liberty International shares will continue to be vulnerable:
December 17th 2008 Harold Newton, a PDMR of Liberty, sold 19,000 shares at 495p taking his holding to 74,000 shares. Also
December 23rd and 24th William Black, also a PDMR of Liberty, sold 10,000 shares at between 482p and 488p, taking his holding to 100,000 shares.
View on Liberty International: Negative
Strength of Signal: Medium
For all comments on Liberty International (LII) click here.
