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I’m a little surpised at the extent of Connaughts (CNT, 11p) fall from grace, but not by its direction.

Founder and CEO Mark Tincknell sold a third of his holding at close to four pounds (375p) not so long ago.

He, or was it the brokers who placed the stock, claimed it was ‘to satisfy institutional demand’.

Just serves as a reminder to look at what directors are doing with their own money.

Close ‘STRONG negative view on Connaught with a 96% absolute and relative (to FTSE 250) return.

See our note of April 30th 2008 here

See also todays FT report of an FSA Inquiry into Connaught. Maybe they should start with a discussion with Tincknell.

( https://followthedirectors.co.uk/2008/04/30/connaught-directors-selling-vs-eaga-directors-buying/)

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

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)

pacelogo The CEO of Pace (PIC, 177.5p), Neil Gaydon, last week exercised options on 850,000 shares at between 63.5p and 74.25p, then sold all 850,000 shares at 177p (May 13th, source London Stock Exchange).

Gaydon continues to hold 41,000 shares and have options over a further 2.3 million shares. We looked back to see if Gaydon had a track record in share transactions, and found some interesting disclosures.

Pace shares were trading at below 40p in June 2006, and ran to a high of 130p 12 months later.

Gaydon and his colleague Anthony Dixon, the Pace Company Secretary, exercised options and sold all their shares in July and August 2007, at prices between 108p and 115p.

Pace shares reached a low again of 35p in November 2008, and have rallied strongly to a high of 186p at the beginning of this month.

Gaydons recent Options Exercise and Sale of all the shares was accompanied again by Anthony Dixon, who sold 135,000 shares at 170p, and also by Chief Operating Officer David McKinney, who sold 250,000 shares at 141p (sales executed between 29th April to 12th May 2009)

We view at share sales following options exercise as follows:

Retention of all shares: Positive ( a net investment by the director)

Sale of sufficient shares to pay for tax and social security: Neutral (no net in- or di-vestment)

Sale of all shares: Negative ( a net disposal by the director)

Pace shares have been hugely volatile, and we  think these Directors Dealings are worth listening to.

View on Pace : Negative (Directors selling shares)

Strength of Signal: Strong (based on individuals track record)

On December 19th, with Johnston Press (JPR, 34.25p) at 12 p, prompted by non exec Ian Russell buying 800,000 shares at 12.25p, we wrote (article: “Johnston Press- option money worth spending?”)

“The jury will remain out on Johnston until the half year results in August 2009 at the earliest.  But the shares certainly won’t be trading at 12 1/4p by then. They will either be worth nothing, or above a pound.”

Nothing has happened to change that opinion. The shares have been as low as 5p, and as high as 41.5p.

One piece of news though supports our view, but is really being used as an excuse to write about Johnston Press: Mr Vickers, an Executive Director of Johnston Press,  bought 7843 shares at 25.5p on May 6th, taking his beneficial holding in the group to 97,000 shares.

So peanuts really. But positive not negative.

View on Johnston Press: Positive (no change)

Strength of signal: Weak (no change)

John Jackson, Non Exec Director of The Restaurant Group (RTN, 157p), and CEO of Jamie Oliver Holdings Limited, prompted us to reiterate our positive signal on The Restaurant Group shares when he tripled his holding on October 20th by buying 200,000 shares at 104p (‘The Restaurant Group Non Exec trebles holding‘).

In March 2008 five directors invested gbp 400k, increasing their positions by between 15 and 50%. This prompted us to view the signal from director dealings as Positive, and of high value (‘STRONG’). See our March 14th comment: ‘Consumer stocks at risk? Not TRG according to directors’.

Jackson this week (May 8th) sold ALL his holding in The Restaurant Group, 300,000 shares, at 161.84p.

This share sale causes us to take profits on The Restaurant Group.

Share performance since March 14th 2008: Shares are up 14% absolute, or up 42% relative to the index (FTSE 250).

Share performance since October 22nd 2008: Shares are up 34% absolute or 10% relative.

View on The Restaurant Group: Negative

Strength of Signal: Medium

For all comments on The Restaurant Group click here.

John Wood Group plc (WG., 236p) have outperformed the market since directors bought shares in October 2008 (up 32% absolute, up 5% relative) and December 2008 (up 27% absolute, up 10% relative) (for the followthedirectors comments on October 28th (179p) and December 10th (185p) click here).

Last week we saw Mark Papworth, an Executive Director of John Wood Group, exercise options over 50,000 shares at 3.3p, and sell them all at 247p. (April 24th, source London Stock Exchange).

We at followthedirectors view this negatively. A sale of sufficient shares to pay for the tax liability on the options exercise would be seen as neutral. A`sale of a greater number of shares is treated as a net sale, in this case of around 25,000 to 30,000 shares. This follows 16 individual cases of share purchases since October 2008 by directors of John Wood Group.

View on John Wood Group plc: Neutral- close positive view of October 28th and December 10th 2008.

Strength of Signal: Weak

interservelogo300ppiInterserve (ISV, 203p) is a services, maintenance and building group (www.interserve.com).

In May to September 2007, Executive Directors Vyse, Jones and Ringrose exercised a significant volume of options, and sold all the resulting shares at between 496p and 526p.

Vyse has since retired, but Adrian Ringrose (CEO), Tim Jones (CFO) and Steve Dance (Exec Director) in March this year started buying shares 60% cheaper, at between 199p and 213p.

Ringrose bought 23200 shares at 213p taking his holding to 112,000 shares, Jones bought 17228 shares at 200p, taking his holding to 61,000 shares, and Dance bought 13427 shares at 199p, inititating a position. (17th to 30th March 2009- source London Stock Exchange).

They have since been followed by Exec Director Bruce Melizan, who on April 8th bought 13954 shares at 192p, initiating a position, and David Thorpe, a Non Exec, also initiated a position by buying 12793 shares at 194p on April 21st.

Conclusion

That makes all four Executive Directors and one Non Exec buying shares in Interserve. Of course this sounds very convincing, but if we look at the historical performance shown by companies we have monitored since November 2007, not so compelling.

In the seven cases where five directors have bought shares, the average relative performance has been -23%.

In the five cases where four or more executive directors have bought shares, the average relative performance is 0.84%.

Directors in these cases may have been subject to group think‘. Without qualitative analysis (interviewing all the directors) we can’t say whether this is true or not.

So history is against you. Of course the past is no indication of the future !!

View on Interserve: Neutral– could change to positive if we see more non exec purchases.

Value of signal (directors dealings)- Weak

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.

Tim Bolton Carter, the Investment Director at Rathbone Brothers (RAT, 808p), has made a small purchase of 1000 shares at 758p (March 30th London Stock Exchange). We’ve seen only sales by directors of Rathbones for the last six months, on which we based our negative view.

But this is the first purchase, and may signal a change in sentiment within the group.

We close our negative view on Rathbone Brothers.

Note of September 25th: ‘Rathbone private client managers sell down holdings’. (1060p)

Since then, Rathbones shares have fallen 24%, which is 8% worse than the market.

View on Rathbones: Neutral

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