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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/)
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)
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
Interserve (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
