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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.
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, http://www.riotinto.com):
“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)
Carnival Cruise Lines (CCL, 1420p) are being squeezed.
‘The average passenger’s age is 45+’ (http://cruises.about.com), 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” (Telegraph.co.uk 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.
Sage directors have not been great fans of the company shares for a while now, transacting only share sales, no purchases, over the last twelve months.
Most notable for their timing were sales by the Group CFO and the CEO of Mainland Europe and Asia, in September 2008 at 190p, just before the shares along with the rest of the stockmarket collapsed into a hole. The share sales were made after exercising options, but I view the sale of all 100% of the shares exercised as a negative signal. For a neutral view, directors would sell only sufficient shares to pay for their tax liability on the options exercise, usually around 40%.
Sage last week announced results. The Wall Street Journal commented that ‘ trading in the three months to Dec. 31 had met its expectations, but its shares fell amid concerns over its U.S. performance and uncertain outlook’ (February 4th)
Sage (SGE, 178p) on Friday announced that Guy Berruyer, the CEO of Mainland Europe and Asia, had sold 75,000 shares at 176p, taking his holding to 240,000 shares. I view this as a negative signal, and adopt a cautious view on the shares.
View on Sage: Negative
Strength of Signal: Medium
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
