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Wow- ‘Liberty undermined by fundraising chatter’ (Independent)’ (LII, 365p)

Sounds very underhand to me.

But wait – only a month ago, Liberty International announced results and said they ‘intend to take further action to improve our liquidity and financial strength, including potential further asset sales and new capital raising’ (February 26th Liberty International Preliminary Results announcement).

Judging by the share price since then, the bears have been covering their shorts (Liberty up 15% from Feb 25th to last night, FTSE unchanged) , and we are reminded through market gossip that the capital raising is imminent.

The cynic in me says that Goldman are not involved, hence the move to a SELL with a target of 302p (Independent article). Where were you Goldman when the price was near 1000p in August last year, and senior management of Liberty were selling shares?

Since our note on August 31st (link below), Liberty International are down 62% in absolute terms, or down 44% relative to the FTSE 100 index.

The ‘directors selling’ signal was reinforced in January 2009, when we saw Harold Newton and William Black selling shares.

Hopefully all will be revealed in the next few weeks, maybe as soon as the Company’s EGM on April 1st (EGM notice here).

Look for opportunities to close the negative view on Liberty International below 300p.

Click here for all Followthedirectors comments on Liberty International:

January 11th, 522p: Liberty International shares continue to be vulnerable

August 31st, 984p: Liberty International- PDMR selling

February 20th, 958p:Liberty Internationals Gordon buys shares. So what.


On September 30th last year, with MAN above 300p,  we saw directors of MAN Group plc (EMG, 219p) buying warrants at around 57p, rather than buying the shares outright.

Probably a good thing really, as MAN Group shares lost 40% of their value in the following six weeks, more than twice the 57p paid for the options.

For our comments on MAN Group in September, read ‘MAN Group Directors step in to buy after results announced’ (WEAK signal).

So what now with the reorganisation and renaming of funds?

With no new directors purchases since September last year, I’m happy to stay on the sidelines here. If management don’t feel the shares offer value, with a yield above 8%, then why should you.

I’d agree with Tempus here, ‘A buy for the brave’, but let the MAN directors show their courage first!

A reader asked me whether the recent share purchases in Robert Walters were significant.

This is my response:

Re Robert Walters Directors Share Purchases.

The share purchases you refer to took place on March 20th and are by CEO Robert Walters, who bought 143,000 shares at 82p taking his holding to 2.3million (excluding any options), COO Giles Daubeney, who bought 48,000 shares at 82p taking his holding to 1.66m, and CFO Alan Bannatyne, who bought 18,000 shares taking his holding to 108,000 shares.

Are these a good indicator of likely future share performance?

Long term (2+ years), I’d say yes.
Walters and Daubeney have a good track record, in that they sold respectively around 4.2m shares at prices between 246p and 360p, and 1.6m shares at between 246p and 368p, over the 16 month period between May 2006 and September 2007. The shares reached a high of 393p in July 2007! (source http://www.Digitallook.com)

So judging on historical performance, you can see these guys got out when the going was good! Does that mean it’s rightfor you and me to be buying the shares now?

First, let’s look at the sales. They took place over 16 months. They were consistent and measured. You’d probably need to assume that the buying by Walters and Daubeney that started in February 2008 might also go on for more than a year.

Secondly, is it possible to call the bottom. No. Walters and Daubeney bought shares at 150-151p in February 2008 (460,000 shares and 216,000 shares respectively).
Walters also paid 90p in November 2008. If you look at the specific purchases from last week, they are a small incremental financial commitment to already significant positions, and therefore do not signal any near term positive news. If they had increased their holdings by 20-30% that would be a different matter.

Thirdly, my analysis of 357 directors transactions over the last 15 months shows that Executive directors transactions have performed pretty much in line with the markets (-1.5% relative), whereas non executive directors have outperformed the market by 6.7 % (relative).

When Executive Directors purchases are supported by Non Executive directors purchases, the relative share performance improves substantially.

So if you are looking to buy shares in Robert Walters, wait for a non executive director purchase to complete the signal.

Regards,

Simon Winfield

Mixed messages me thinks on IG Group (IGG, 183p)

January 20th 2009 saw a presentation and announcement by IG Group for the six month period to end November 2008  (can be found on company website), from which I have copied the following phrase:

‘trading since the period end has continued to be strong’

This was supported by presentations and discussions with investors and brokers, in the vein that activity continued to be strong due to the high level of volatility in the market.

March 10th 2009, in an ‘Interim management statement’ , IG Group said that

‘growth against very strong comparatives, is challenging (in UK and Australia)’

‘overall growth of the Group is impacted by a very strong comparative period’

‘UK has been affected by the implementation of more stringent risk controls in October’

‘The uplift of revenue that the group typically experiences on a higher volatility day is becoming progressively less marked’

The FT commented : ‘IG yesterday said revenue in both the UK and Australia – its two biggest markets – had fallen by 7 per cent to £31.5m and £6.4m respectively during its third financial quarter’.

FT article.

Times article.

And not surpisingly, the share price falls by more than a third, from 260p to 180p.

So what happened? January 20th was already 51 days into the quarter.

Either trading collapsed since January 20th, or the company hadn’t detected a deterioration in trading when they announced Interim results on January 20th.

But wait! Somebody must have had an inkling of the risks inherent in the shares. Maybe the COO, Peter Hetherington believed the shares to fully reflect the positive news, with risk on the downside. He sold on January 28th and 29th 700,000 shares, reducing his position in the group by almost 40%.

We commented on Hetheringtons sale on February 2nd, when the share price was 280p.

View on IG Group – close negative view with 34% absolute and 32% relative (to FTSE 250) return.

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