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Miguel Ramis, Compass’ Head of European Operations, not a board director, but an individual of PDMR (person with direct management responsibility) has sold 120,000 shares at 355.89p leaving him with 548,000 shares (London Stock Exchange February 6th 2009).
Compass Group (CPG, 355p) have been a wonderful outperformer relative to the market, up 50% since we turned positive on the shares on March 18th (‘followthedirectors: The Compass points North‘) as a consequence of share purchases by Roy Gardner the Chairman, and Richard Cousins the CEO.
If you remember, the market had concerns over food price inflation, and whether or not Compass would be able to recover increased costs in their contracts.
The company statement announcing Ramis’ share sale describes him using the proceeds ‘used in repect of settlement of the specific lending obligations‘. Doesn’t that mean he’s paying down a loan?
I interpret this as a lame excuse for his share sale, and I am happy to take profits on shares bought in March at 309p, a performance 50% better than that of the FTSE 100 index.
View on Compass Group: Negative
Strength of Signal: Medium
On November 26th, ‘Market veteran buys back into IG Group‘, we analysed Jonathan Davies’ purchase of 90,000 shares in IG Group (IGG, 280p) at 183p as a buy signal (although a WEAK one: solo buyer, small % increase in holding).
Since then IG Group are up 37% absolute or up more than 30% relative to the market.
Now we see that last week Peter Hetherington, IG Groups Chief Operating Officer, sold 700,000 shares at 284p, taking his holding to 976,000 shares (January 28th, 29th, source London Stock Exchange).
Hetherington has an excellent track record. He sold almost 40% of his holding, or 1m shares, at 400p in October 2007, within 7% of the all time high achieved the same month.
View on IG Group: Negative. Take profits on any purchases of November 26th.
Strength of Signal: STRONG
Between January and May last year, the CEO of easyjet (EZJ 301p), Andrew Harrison, doubled his position in the group by investing almost GBP 1.2 million ( ‘Harrison accelerates buying of Easyjet‘- followthedirectors, May 29th 2008).
Now Harrison has almost halved his position by selling 400,000 shares at 326p (January 28th, London Stock Exchange), leaving him with 438,000 shares.
Harrison bought easyjet shares when we were all panicking about highly inflationary oil prices. Oil peaked within two months of Harrisons share purchase, and easyjet shares outperformed the FTSE 250 by more than 60% from May 29th to now.
Is this directors share sale an important signal?
Yes, certainly for easyjet shareholders who have substantially outperformed the market, and in absolute terms are flat on the May 29th level, quite a remarkable achievement in these turbulent times.
And maybe even for Crude oil watchers.
Either costs are going to start rising at easyjet, or yields are at risk, despite what the company says in their statements ‘easyjet sees better H1‘ (Reuters January 22nd).
View on easyjet: Negative
Strength of Signal: Strong (track record, size and % of share sale)
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
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.
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.
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
Eaga (EAGA, 112.5p), the UK heating system provider for social housing, has announced that the CEO and CFO are each selling 1.1m shares ‘to satisfy tax liabilities incurred at IPO which are due shortly, ……..and to provide an element of liquidity‘ (Company statement November 25th, source London Stock Exchange).
In April eaga directors bought shares, taking advantage of a depressed share price resulting from costs concerns primarily related to copper prices. This prompted us to look at eagas valuation, and its comparison with Connaught (CNT, 366p), a similar company, where directors had been selling shares.
Since April 30th ‘Connaught (directors selling) vs Eaga (directors buying)‘ Eaga are down 13.5%, the FTSE 250 index is down by over 40%, and Connaught are down 8.67%.
If the CEO and CFO are selling shares, then maybe we should also.
So we close our positive view on eaga with a 27% relative performance vs the FTSE 250, and a -5% relative performance vs Connaught.
View on eaga- Negative – directors selling shares.
Strength of signal- Medium
For all followthedirectors comments on eaga click here.
Share transactions:
John Clough CEO sold 1.1m shares at 110p taking his holding to 5.236m shares.
Ian McLeod CFO sold 1.1m shares at 110p taking his holding to 3.982m shares.
Follow up on our HSBC call of October 12th:
Recent negative newsflow for HSBC (HSBA, 702p) is now mostly in the price.
‘The extent of the slowdown in the Chinese economy became clearer on Thursday when the government disclosed that the rate of increase of industrial production had dropped to the lowest level in seven years’ (Source- FT.com November 13th 2008).
The FT goes on to say ‘Four days after unveiling a massive fiscal stimulus programme, the government said that industrial production increased by 8.2 per cent in October – well below forecasts’.
I suspect that the market now knows much (if not all) of what the HSBC directors knew back in early October when they sold their shares (see followthedirectors comment of October 12th ‘ HSBC- Directors Sell- ‘Credit tightening’ now hitting China growth’).
In the four weeks since our October 12th comment, HSBC are down 10% while the FTSE 100 is up 9%.
For all our comments on HSBC click here.
followthedirectors... a study of directors share dealings 