You are currently browsing the category archive for the ‘FTSE 100’ category.

I want to talk about share purchases made by BT Group plc (BT.A, 92.5p) Directors and PDMRs on June 1st, namely Ian Livingstone, Tony Chanmugan, Sally Davis, Rod Louwhoff, Gavin Patterson and Al-Noor Ramji, who between them bought over 1/2 million shares at 89p (source: London Stock Exchange)

Warning bells ring as soon as I see this number of directors buying shares all at the same time.

So a close look at the BT Group Annual report 2009 (May 13) reveals the reason as follows:

Page 58: ‘All executive directors and members of the Operating Committee will, immediately after payment, use their annual cash bonus for 2008/2009, after tax, to purcahse shares in the company’.

Page 60: ‘The CEO is required to build up a shareholding of 2x salary and the remaining directors 1.5x salary.’

Looking at the declared cash bonus for Livingstone of 343,000 pounds, netting of 40% tax, gives around 200,000 pounds. Livingstone bought 224,000 shares at 89p on June 1st.

We thoroughly support this requirement to purchase shares, as it aligns the Executive members of the Board and the Operating Committee with shoreholders, but it means that for ‘signals’ generated by directors dealings we need to look at activity by non execs.

Sir Michael Rake, the non executive Chairman, has been buying shares. He bought 12,000 at 166p in September, 20,000 at 127p in November, and 28,000 at 72p in March.

These purchases are relatively small, and have not (yet) been reinforced by activity by other non execs.

Further buying activity by other non execs would send a positive signal.

View on BT Group: Neutral (no signal from directors dealing activity).

See other comments by followthedirectors on BT Group here.

We’ve found that non execs outperform execs by somewhere between 7% and 11% amongst the directors dealing transactions we have observed over the last 18 months. We are unsure as to whether this outperformance is a feature of bear markets, or will continue when share markets are rallying.

Our thesis when we started followthedirectors was that non execs would have a better ‘handle’ on both valuations and the competitive and economic environment due to their involvement in  activities outside the firm on whose board they sit.

A few transactions over the past week where only non execs have been buying shares are worth noting as follows:

Vodafone (VOD, 116p)

announced that on May 22nd that Sir John Bond, the group Chairman, bought 100,000 shares at 116p, taking his holding to 337,000. We looked back at recent history, and found another non exec, Luc Vandevelde, buying 32,500 shares at 120p on March 24th, taking his holding to 72,500 shares.

View on Vodafone : Positive                   Value of directors dealings signal: High/Strong

Eaga (EAGA, 127p)

saw two purchases ny non execs last week, namely Roger Ayland and Malcolm Simpson, who bought 50,000 and 8,000 shares respectively, at around 120p, taking their holdings in the energy efficiency company to 50,000 and 96,000 shares respectively.

View on Eaga : Positive                              Value of directors dealings signal : High/Strong

QinetiQ (QQ., 146p)

last week announced share purchases by non execs Nick Luff and David Lees. Luff bought 20,000 shares at 141p, taking his holding to 70,000 share, and David Lees bought 10,000 shares at just over 144p, taking his holding to 83,000 shares. Back on the 12th of March, the CEO Graham Love had bought 100,000 shares at 141p, pushing his shareholding to over 5 million shares.

Sir John Chisholm, the Executive Chairman, called the top on QinetiQ when he sold 1.5 million shares within 8p of the high, at 220p, on 27th August last year. 

View on QinetiQ: Positive                  Value of directors dealings signal: High/Strong

The CFO of Tesco (TSCO, 365p), Lawrie McIlwee, last Thursday May 28th sold 36,282 shares in the multinational retailer at 370p, taking his holding to 18,000 shares.

We remembered some other recent sales, as a result of Options Exercises. In both cases all of the shares exercised were sold, which we interpret as negative on the basis that it results in a net sale of shares. If the directors had sold only sufficient shares to pay their tax and national insurance liabilities, then the transaction would be viewed as neutral.

On May 12th the IT director Philip Clarke exercised and sold 332,000 shares at 351p, leaving his holding unchanged at over 650,000 shares.

On May 19th Tim Mason, the President and CEO of the US operation, Fresh and Easy, exercised and sold 247,000 shares at 355p, leaving his holding unchanged at 678,000 shares.

View on Tesco: Negative (Directors selling shares)

Strength of Signal: Strong

(source: London Stock Exchange)

I’m thinking of taking some profits on 3i (III, 400p) (theoretical ex rights price 250p)

There will be no new news from this private equity group until the Interim Results, which are to be released in July, maybe with the AGM which is on July 8th (company website Financial calendar http://www.3igroup.com)

In reviewing the media on 3i I’ve come across a few ‘soundbites’ which are worth noting:

May 11th in a CNBC interview 3i Group Communication Director Patrick Dunne admitted the rights issue to be opportunistic: ‘we don’t need the money’.

He then went on to say that private equity valuations were ‘not quite at the go-shopping point’ yet. He also suggested that the target return of 20% was ‘being reviewed‘, that the returns ‘would be much more volatile going forward‘.

I was also drawn to a couple of questions in an article by Simon Nixon at the WSJ, also on May 11th: ‘investors need to ask themselves two questions: Has 3i sufficiently written down its existing £8 billion of assets under management, including £4 billion on its own balance sheet? And will future returns be sufficient on a risk-adjusted basis?’

3i shares are up 94% absolute or 74% relative to the market since our comment of February 25th ‘3i – Five of the seven non execs have bought shares in the last month’.

I’ve sold today half my position in the group.

For all followthedirectors comments on 3i click here.

In our analysis we have found non execs to substantially outperform executive directors when it comes to dealing in shares in their own company, to the tune of around 12-15%.

For further information on this see our post of April 2nd: ‘Non execs make better investors- by far’

There are a few recent transactions worth pointing out because they are by non execs only:

Homeserve (HSV, 1337p)

After announcing a proposal to divest of its  UK Emergency Services business this week, non execs Mark Morris and Andrew Sibbald each bought 2000 shares in the group, at 1278p and 1244p respectively, on the 22nd May and the 20th May respectively.

They each now hold 2000 shares.

Genus (GNS, 616p)

The animal breeding group have seen purchases by three non executive directors this week. On Monday the Non executive Chairman John Hawkins bought 1000 shares at 576p, taking his holding to 5100 shares. Mike Buzzacott bought 1000 shares at 578p, taking his holding to 1000 shares.

And on Tuesday Barry Furr bought 5000 shares at 600p, taking his holding to 8000 shares.  There are no imminent financial results due, but there have been bid rumours in Genus in the past. See our post of October 16th ‘Genus breeding positive directors’.

National Grid (NG., 587p)

Three non execs have bought into National Grid shares. Bob Catell, also a Deputy Chairman, bought 10,000 shares in ADR form, investing about 80,000 pounds, and taking his holding to 50,000 shares (May 21st).

On May 14th, John Allan and Philip Aiken paid 580p for shares, Allan buying 5000 and taking his holding to 7000 shares, and Aiken buying 1500 shares and now owning 3500 shares. The Questor article of May 14th is worth reading.

View on the above: all Positive (directors buying)

Strength of Signal:  all Strong (only non execs buying)

We made some money out of Experian (EXPN, 474p) after buying in November 2007 following directors purchases. We took profits in December 2008, follwing a share sale by non exec David Tyler, recording a 50% outperformance relative to the FTSE 100 share index.

Since then however, Experian shares have continued to perform well, rising by 13% with the market only just in positive territory, rising a paltry 1.6%.

Two transactions on May 20th and 21st have caused us to be more cautious on Experian:

  1. John Peace, the Chairman, has exercised options over 353,000 shares and sold them all, realising 1.75m pounds. He maintains his position at 1.1 million shares.
  2. David Tyler, the non exec who sold shares in December, has sold a further 100,000 shares at 479.55p.

View on Experian: Negative, Directors selling shares

Strength of Signal: Strong

Tomkins (TOMK,151p). this stock has run from 95p in November to above 150p now. So it is interesting to see a PDMR (senior management, but not board level) selling down his holding. Terry O’Halloran has sold 62147 shares at 147.5p, taking his holding to 363,000.

TUI Travel (TT., 255p). Another stock that is up 70% from its November lows. The Commercial Director, Will Waggott, has sold 70,000 shares at 252.27p, only a few pennies shy of where CEO James Long sold all the 828,000 shares he exercised in May 2008. The shares might start to run into a bit of resistance here.

Rotork (ROR, 844p). Carlos Elvira, the Sales and Marketing director, has a track record in his dealings:

13th May 2008, sold Rotork shares at 1146p

24th October 2008, bought Rotork shares at 664p

6th April 2009, sold Rotork shares at 818p

+ Beazley (BEZ, 99p) announced a purchase by Non Executive Chairman Jonathan Agnew of 15,000 shares at 93.77p (April 8th 2009), taking his holding to 213,000 shares. Agnews colleagues Andrew Beazley and Andrew Horton both dipped their toes in the water and bought a negligible number of shares when compared to their existing holdings back in the October slump at around 87-89p. The stock rallied to 130p, and is now back below a pound. If we see more non exec purchases we’ll look to take action.

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!

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.

Add to Technorati Favorites

Prefer to get emails? Click here

RSS Find us on twitter.com/directorsdeals

  • An error has occurred; the feed is probably down. Try again later.

twitter

September 2020
M T W T F S S
 123456
78910111213
14151617181920
21222324252627
282930  

twitter