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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.

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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)

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+’ (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.

sagelogo80 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

So Yea was right, again.

Yea, until last week the CEO of the UK venture capital group 3i (III, 219p), sold GBP 500,000 of shares back in July 2008 at 823.5p (see ‘3i- Hooray for Yea- now take profits‘-followthedirectors.co.uk July 23rd)

3i shares are now trading at 219p, a fall of 76%. The FTSE 100 index has fallen over the same period by 24%. In my calculations that means that 3i have underperformed the index by around 67% since July last year, when Yea sold his shares.

Last week 3i announced a new CEO, Michael Queen. Queens appointment was swiftly followed by a raft of directors purchases, which may have some significance (see below).

I’m always a little wary of these sort of directors dealings. Are they expressing their support for the incoming CEO, or do the directors think they can make money by buying shares ahead of significant cost cutting announcements or changes in strategy?

As a result of my concerns I’m only going to give these signals a MEDIUM rating, pending further director buying activity. But having said that, I’m happy to close my negative view on 3i, and to take some very nice profits.

View on 3i: POSITIVE

Strength of Signal: MEDIUM

For all posts on 3i click here.

Directors purchases (source London Stock Exchange):

Michael Queen, CEO, bought 100,000 shares at 216.6p, initiating a position. Jan 30th.

Willem Mesdag, Non exec, bought 25,000 at 210p, initiating a position (I estimate). Jan 29th.

Guy Zarzavatjian, PDMR, bought 305,000 at 210.7p, postion unknown. Jan 29th.

Lord Smith, Non exec, bought 5,000 shares at 213p, taking his holding to 9500 shares. Jan 29th.

Robert Swannell, Non exec, bought 4,000 shares at 210.3p, taking his holding to 17,000 shares. Jan 29th.

Baroness Hogg, Chairman, bought 5,000 shares at 213p, taking her holding to 5,000 shares. Jan 29th.

The risk to Marks and Spencer (MKS, 222p) was obvious from what I perceived to be exposure to a customer base with limited spending power. The whiff of Lily of the Valley with a faint hint of urine as I descended the escalator to the underwear and luxury foods hall at Marks’ Aberdeen branch betrayed the identity of a large part of the  groups customer base, the female pensioner.

When the mother in law switched her twice weekly shop from the nice fish and pre cut green beans in the food hall at Marks to the scrums at ASDA was when the profit warnings started. With UK interest rates collapsing, the purchasing power of this segment of Marks’ customer base has now evaporated.

But we have seen directors starting to buy shares, although in limited volumes.

I was tentative when Marks’ Deputy Chairman Sir David Michels picked up 84,000 shares in July and August between 249p and 265p (See ‘Marks- Sir David Michels increases holdings by 50%’).

Marks have however outperformed the index since August 16th, by 8%.

I still am tentative when I see Non Executive Director Jan du Plessis buy 20,000 shares at 222p (January 21st 2009), initiating a position in the group having been appointed non exec on November 1st 2008.

Du Plessis earned his stripes as CFO of the Swiss and South African luxury goods group Richemont for 16 years to 2004.

My view on Marks remains unchanged until I see more directors committing capital in bigger $$ amounts, something which may happen soon. Come on Mr Rose.

View on Marks and Spencer: Positive

Strength of Signal: Weak (requires further director buying to move towards Strong)

For all Marks and Spencer comments on this site, click here: Marks and Spencer

Only a day after being appointed a non exec of Cairn (CNE,  1806p), Dr James Buckee has invested GBP 35k by buying 2000 shares at 1762p.

‘Dr Buckee was previously President and Chief Executive Officer of Talisman Energy Inc. Dr Buckee holds a BSc Honours in Physics from the University of Western Australia and a PhD in Astrophysics from Oxford University’ (Company website).

In October 2008,  six directors of Cairn invested just shy of GBP 480k at 1816p. See ‘Cairn Energy – Directors buyback closes negative view with 45% return’.

Since then Cairn have outperformed the market (FTSE 100) by 9%.

In April 2008 two non exec directors of Cairn sold shares at 2915p, and in May six directors sold shares at 3366p. From April to October Cairn fell 45%, which was 20% more than the market. See ‘Cairn Energy- non execs reduce holdings substantially’.

Based on historical performance,  I believe that any dealing activity by Cairn directors is worth listening to.

View on Cairn: Positive

Strength of signal:  Medium, no change from our comment of October 9th 2008.

News ahead: Operational Update from Cairn tomorrow (!) January 20th.

For all our comments on Cairn click here.

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