You are currently browsing the monthly archive for February 2009.

On February 2nd we closed our negative view on 3i (III, 206p) with a 67% return relative to the market, or a 76% absolute return (post here).

We were a little wary of recent directors purchases, suggesting that they were in support of the incoming CEO Michael Queen.

The market appluaded McQueens appointment and rewarded the shares with a 23% run in the following two weeks. Since then however concerns have arisen over 3i’s credit rating, and the shares have given up all those gains.

On February 4th Richard Meddings, non exec, added a further 5,000 shares at 225p, and on 24th February Willem Mesdag, another non exec, doubled his position by buying 25,000 shares at 198.5p.

Over the last month therefore we have five of the seven non execs buying shares, althouh admittedly in limited volumes. Total purchases by non execs add up to only 70,000 shares.

However due to the number of non execs buying shares, we are moving 3i from a MEDIUM strength signal to a STRONG signal.

View on 3i: Positive

Strength of Signal: STRONG

For all posts on 3i click here.

Chairman Elect Sir Peter Gershon has invested GBP 133k in Tate and Lyle (TATE, 282p), ahead of his arrival at  Sugar Quay.

Is this purchase a vote for himself, or a money making opportunity?

When in September six of the seven non execs of Tate bought shares (see Tate sweetener, directors see opportunity in weak share price, September 26) , the share price had outperformed the market by around 50% over the following two months.

Having hit the earth with a bang, giving up all its relative gains over a falloff in fizzy drink demand, it seems the newest non exec, Chairman Elect Peter Gershon sees value.

View on Tate and Lyle: Remains positive- high number of non execs buying shares over last 5 months.

Strength of Signal: Remains STRONG

Yesterday Carnival (CCL, 1411p) announced hat two directors had sold shares.

In fact both Peter Ratcliffe, Board director, and David Dingle, CEO of Carnival UK, had both exercised options and sold the resulting shares, Ratcliffe realising GBP 240k, and Dingle realising GBP 45k.

If a director sells sufficient shares to pay his/her taxes due on the options exercise then I consider the transaction a ‘neutral’ one. If a director sells all the shares exercised then I consider it a disposal, and a negative indicator.

So these transactions I view as negative for the shares. Ratcliffe realised GBP 150k earlier this month through a sale of  12,500 shares.

Directors have been selling since August last year. Carnival shares have performed in line with the market over the period.

View on Carnival: Negative

Strength of Signal: STRONG

For all previous posts on Carnival see here.

Now that the market seems to have woken up to the risks at Brambles (BXB, 210p, A$ 4.96) from a slowdown in world trade, and pricing pressure, I’m happy to close my negative view on Brambles.

We initially warned of the downside risk in the group following a directors share sale (Craig van der Laan de Vries) in late March 2008, when Brambles were trading above 420p.

We reiterated our caution in early June, ahead of what turned out to be a dismal trading update, resulting in the shares falling 14% on the day.

And lastly, last week we highlighted caution ahead of this weeks results, following which the shares fell by 20%.

So, whilst the outlook is likely to continue to deteriorate for Brambles, we feel that the recent share price correction has been indicative of the market now having a better understanding of the risks at Brambles.

Close negative view of Brambles:

March 23rd 2008 with 48% absolute return or 20% return relative to the market,

June 2nd 2008 with 44% absolute return or 16% return relative to the market,

February 10th 2009 with 25% absolute return or 20% return relative to the market.

For all our posts please read

Sell high, Buy low. That’s what I was taught.

This completely failed when in September I suggested that De La Rue (DLAR, 1001p) were ‘up with events’. The company declared a ‘strong order book’  and ‘operating cashflow remains strong’.

This resilience, coupled with a market meltdown in October, meant that investors were prepared to pay a premium for certainty of cashflow, hence De La Rue’s 48% outperformance against the market (September post ‘De La Rue CEO and CFO raise 1 million pounds’).

CFO Stephen King yesterday sold just under 30,000 shares at 1001p, taking his holding down to around 16,000 shares.

I’m of the belief that things can’t get any better for De La Rue, and continue my cautious stance. Also, take a look at Kings timing. He seems pretty good at taking advantage of the share spikes to optimise his share sales.

View on De la Rue: Negative

Strength of Signal: Remains STRONG


Three directors of Rio have invested about GBP 560,000 in RioTinto (RIO, 1925p) shares over the last few days.

On their own, I would see this as a STRONG signal to investors, but as Rio are in the process of asking shareholders to approve the terms of the Chinalco deal, I think these purchases should be taken with a healthy dose of scepticism.

Paul Skinner, Chairman of Rio Tinto,  said in a recent press release (February 12th,

“Chinalco’s investment is a clear vote of confidence in Rio Tinto’s strength, its growth prospects and the outlook for the commodities we produce.”

To show his personal support for the deal (I believe) Skinner has bought 4000 shares at GBP 19.6955, investing almost GBP 80k (source: London Stock Exchange, date 16/2/09). Put this in the context of Skinners pay as Chairman, GBP 693,000 in 2007 (source: RioTinto annual report 2007).

The other purchases were made by Executive Director Dick Evans, who bought 10,000 ADRs at $114.685 (13/2/09) and Lord Kerr (Non executive director) who bought 4000 shares at GBP 19.38 (16/1/09) (source: London Stock Exchange).

View on RioTinto: Positive

Strength of Signal: WEAK (clouded by company being in the process of a share offer and asset sale)


I’m not suggesting that Carphone Warehouse’s (CPW, 108.5) CEO Charles Dunstones message of ‘dread’ to his staff prompted Non Exec Chairman John Gildersleeves share sale.

Gildersleeve did say the sale of 138,000 shares at 108.75p was ‘for tax planning purposes’ (source:London Stock Exchange). But then I suppose he would be very unlikely to say ‘because the shares are expensive’ would he?

Gildersleeve is left with 246,000 shares post this sale.

Charles Dunstones email last month to staff was aimed at reducing costs and increasing subscriber numbers. Dunstone concluded by saying

“I am sorry to have to send such a grim message, but I feel it is my duty to prepare us for the worst; everything I read and observe fills me with dread for the state of the whole global economy” (Source: reported 16th January 2009)

I suppose we should have paid more attention to mr Dunstones partner, David Ross, who in June last year sold 15 million shares to the Carphone Warehouse Employee Benefit Trust at 217.5p (June 19th 2008 source: London Stock Exchange). I bet the employees aren’t too chuffed.

View on Carphone Warehouse: Negative

Strength of Signal: Medium

Brambles (BXB, $5.64) disappoints.  Stock falls 12%.

We warned last week of the inherent risk in these interim results, in ‘Brambles- thorny results due February 19th’. Management must have thought it prudent to release results a few days earlier than expected.

We first highlighted a negative opinion on the stock following Craig van der Laans share sale in March last year, raising GBP 700,000. Since then Brambles shares are down 41% in A$ terms, 10% points more than the AORD index. For all our comments on Brambles click here.

Bloomberg commented a few hours ago:

“Brambles Ltd.’s first-half profit dropped 28 percent, prompting the world’s biggest supplier of pallets used to move and store goods to cut operations in the U.S. and eliminate 750 jobs. Net income fell to $212.8 million in the six months to Dec. 31 from $293.7 million in the year-earlier period, Sydney-based Brambles said today in a statement.

Revenue fell 2 percent to $2.07 billion; shareholders will receive an interim dividend of 17.5 Australian cents a share. The U.S. is in the midst of a credit crisis that lies at the heart of the worst global recession since World War II. The country’s labor market has lost 3.6 million jobs since the recession started in December 2007 after companies from Wal-Mart Stores Inc. to General Motors Corp. announced payroll cuts.

“Brambles is, of course, not immune to the dramatic slowdown in key markets and our results reflect this,” Chief Executive Officer Mike Ihlein said in the statement to the Australian stock exchange. “Consequently, it is important we take decisive actions now to underpin our future performance.””

Back in August last year, the CFO of BT Group (BT.A, 99p) Hanif Lalani, invested GBP 100,000 at 171p.

On Friday he was joined by his CEO Ian Livingstone, who bought 99,500 shares at 99.7p, taking his holding to 759,000 shares, in addition to over 2.5 million deferred compensation and incentive shares.

This isn’t a buy signal.

Livingstone has been in and out of BT all year, and this purchase does not signal any change in behaviour. Livingstone bought at 230p in February 2008, sold at 233p and 172p in May and August, and bought at 163p in August also. Make of that what you will!

For a positive signal on the stock, we need to see more non execs buying. Chairman Sir Michael Rake bought at 127p and 166p in September and November 2008, almost doubling his holding by buying 32,000 shares. BT has seven other non execs, and they haven’t bought yet.

View on BT Group: Neutral

Signal from directors dealing activity: WEAK

Carnival Cruise Lines (CCL, 1420p) are being squeezed.

‘The average passenger’s age is 45+’ (, and those potential customers of Carnival are being squeezed in their spending power by falling interest rates, falling pension and savings valuations, and other pressures on them such as highlighted in Saturdays Telegraph:

“A Daily Telegraph survey – the first of its kind since the recession began – highlights the heavy toll being taken on Britain’s so-called “Babygloomers”.

Almost one in ten adults are having to contribute to their parents’ upkeep, the research found. The Norwich Union research suggests more than 1.3 million adults aged between 17 and 65 are paying their parents more than £250 each month, with some paying up to £1,000.

Many pensioners have found themselves struggling as their income from savings has virtually disappeared following the drop in interest rates. As a result, they have been forced to turn to their children for help” ( February 14th 2009).

Carnival directors Howard Frank and Robert Dickinson were sellers back in June and August last year, raising over $4 million between them through share sales.

Peter Ratcliff, the former CEO of Princess Cruises Intl, on Febraury 2nd sold 12,567 shares at 1245p, raising over GBP 150k.

The stock since August has performed in line with the market, in my view rescued by falling oil prices. I can imagine that booking a cruise has a long lead time, so any bad news on Carnival is likely to appear later in the consumer cycle rather than sooner.

Carnival cut their dividend in November, saving over $1bn a year.

I continue with my negative view on the shares, with a ‘STRONG’ signal from directors share sales.

For all posts on Carnival click here.

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February 2009