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Ian McHoul, a non executive director of Premier Foods (PFD, 33p) last week sold 177,000 shares at between 34.67p and 34.75p, to take his holding to zero.
We turned positive on Premier Foods on October 21st at 32.25p, on the news that 7 directors and 4 PDMRs bought shares (followthedirectors comment of October 21st here).
It has been a bit of a roller coaster ride in this one, with the shares driven this way and that over funding concerns, trading as low as 16p and as high as 38p.
These concerns were addressed at the beginning of March, when the company raised GBP 37om net of expenses, which gives them plenty of breathing room with the debt covenants pushed out to 2013 (Independent article of 6th March).
We close our positive view as a result on the sale of shares by the non exec.
Performance since October 21st 2008: +3% absolute, -6% relative.
View on Premier Foods : Neutral
Mixed messages me thinks on IG Group (IGG, 183p)
January 20th 2009 saw a presentation and announcement by IG Group for the six month period to end November 2008 (can be found on company website), from which I have copied the following phrase:
‘trading since the period end has continued to be strong’
This was supported by presentations and discussions with investors and brokers, in the vein that activity continued to be strong due to the high level of volatility in the market.
March 10th 2009, in an ‘Interim management statement’ , IG Group said that
‘growth against very strong comparatives, is challenging (in UK and Australia)’
‘overall growth of the Group is impacted by a very strong comparative period’
‘UK has been affected by the implementation of more stringent risk controls in October’
‘The uplift of revenue that the group typically experiences on a higher volatility day is becoming progressively less marked’
The FT commented : ‘IG yesterday said revenue in both the UK and Australia – its two biggest markets – had fallen by 7 per cent to £31.5m and £6.4m respectively during its third financial quarter’.
And not surpisingly, the share price falls by more than a third, from 260p to 180p.
So what happened? January 20th was already 51 days into the quarter.
Either trading collapsed since January 20th, or the company hadn’t detected a deterioration in trading when they announced Interim results on January 20th.
But wait! Somebody must have had an inkling of the risks inherent in the shares. Maybe the COO, Peter Hetherington believed the shares to fully reflect the positive news, with risk on the downside. He sold on January 28th and 29th 700,000 shares, reducing his position in the group by almost 40%.
We commented on Hetheringtons sale on February 2nd, when the share price was 280p.
View on IG Group – close negative view with 34% absolute and 32% relative (to FTSE 250) return.
Sell high, Buy low. That’s what I was taught.
This completely failed when in September I suggested that De La Rue (DLAR, 1001p) were ‘up with events’. The company declared a ‘strong order book’ and ‘operating cashflow remains strong’.
This resilience, coupled with a market meltdown in October, meant that investors were prepared to pay a premium for certainty of cashflow, hence De La Rue’s 48% outperformance against the market (September post ‘De La Rue CEO and CFO raise 1 million pounds’).
CFO Stephen King yesterday sold just under 30,000 shares at 1001p, taking his holding down to around 16,000 shares.
I’m of the belief that things can’t get any better for De La Rue, and continue my cautious stance. Also, take a look at Kings timing. He seems pretty good at taking advantage of the share spikes to optimise his share sales.
View on De la Rue: Negative
Strength of Signal: Remains STRONG
I’m not suggesting that Carphone Warehouse’s (CPW, 108.5) CEO Charles Dunstones message of ‘dread’ to his staff prompted Non Exec Chairman John Gildersleeves share sale.
Gildersleeve did say the sale of 138,000 shares at 108.75p was ‘for tax planning purposes’ (source:London Stock Exchange). But then I suppose he would be very unlikely to say ‘because the shares are expensive’ would he?
Gildersleeve is left with 246,000 shares post this sale.
Charles Dunstones email last month to staff was aimed at reducing costs and increasing subscriber numbers. Dunstone concluded by saying
“I am sorry to have to send such a grim message, but I feel it is my duty to prepare us for the worst; everything I read and observe fills me with dread for the state of the whole global economy” (Source: channelregister.co.uk reported 16th January 2009)
I suppose we should have paid more attention to mr Dunstones partner, David Ross, who in June last year sold 15 million shares to the Carphone Warehouse Employee Benefit Trust at 217.5p (June 19th 2008 source: London Stock Exchange). I bet the employees aren’t too chuffed.
View on Carphone Warehouse: Negative
Strength of Signal: Medium
On November 26th, ‘Market veteran buys back into IG Group‘, we analysed Jonathan Davies’ purchase of 90,000 shares in IG Group (IGG, 280p) at 183p as a buy signal (although a WEAK one: solo buyer, small % increase in holding).
Since then IG Group are up 37% absolute or up more than 30% relative to the market.
Now we see that last week Peter Hetherington, IG Groups Chief Operating Officer, sold 700,000 shares at 284p, taking his holding to 976,000 shares (January 28th, 29th, source London Stock Exchange).
Hetherington has an excellent track record. He sold almost 40% of his holding, or 1m shares, at 400p in October 2007, within 7% of the all time high achieved the same month.
View on IG Group: Negative. Take profits on any purchases of November 26th.
Strength of Signal: STRONG
Between January and May last year, the CEO of easyjet (EZJ 301p), Andrew Harrison, doubled his position in the group by investing almost GBP 1.2 million ( ‘Harrison accelerates buying of Easyjet‘- followthedirectors, May 29th 2008).
Now Harrison has almost halved his position by selling 400,000 shares at 326p (January 28th, London Stock Exchange), leaving him with 438,000 shares.
Harrison bought easyjet shares when we were all panicking about highly inflationary oil prices. Oil peaked within two months of Harrisons share purchase, and easyjet shares outperformed the FTSE 250 by more than 60% from May 29th to now.
Is this directors share sale an important signal?
Yes, certainly for easyjet shareholders who have substantially outperformed the market, and in absolute terms are flat on the May 29th level, quite a remarkable achievement in these turbulent times.
And maybe even for Crude oil watchers.
Either costs are going to start rising at easyjet, or yields are at risk, despite what the company says in their statements ‘easyjet sees better H1‘ (Reuters January 22nd).
View on easyjet: Negative
Strength of Signal: Strong (track record, size and % of share sale)
Seven directors of Burberry (BRBY, 229p) bought shares in November after the group warned of ‘tough conditions going into Christmas’.
Results today show like for like sales down only 3%, and an expansion of the cost cutting plan by an additional GBP 30-35m (Burberry Third Quarter trading statement here).
The shares have bounced sharply in relief today that trading over Christmas wasn’t as bad as the market had been anticipating.
So who did you listen to, the scary ‘tough conditions statement’ or the directors ?
Did you pay attention to the words or the actions?
Burberry shares are now up more than 35% since our comment on November 24th (STRONG signal, Positive view, see ‘Burberry Check’), and have outperformed the FTSE 250 index by over 20%.
Take profits.
Barratt (BDEV, 80.25p) directors have been actively buying into the group since November, initiating or significantly increasing their personal holdings as follows (Source: London Stock Exchange):
- November 18th Robert Lawson, Non exec Chairman, bought 151,000 shares at 65.3p, and now holds the same amount.
- November 20th Mark Rolfe, Non exec director, bought 30,000 shares at 62p, and now holds the same amount.
- December 19th Mark Clare, CEO, bought 357,000 at 69p, taking his holding to 529,000 shares.
- December 19th Mark Pain, CFO, bought 60,000 at 74.8p, taking his holding to 100,000 shares.
- December 23rd Stephen Boyes, Executive Director, bought 65,000 shares at 76.4p, taking his position to 107,000 shares.
Between them these directors have invested GBP 450k, at a time of great uncertainty in both the stock and property markets.
Barratt have however impressed the market with recent results, showing an impressive ability to generate cash and pay down debt, as well as reduce costs by shedding 60% of their employees.
The group today warned of margins being squeezed, and therefore unlikely to meet brokers estimates [ which is probably near term and pretty irrelevant to the long term viability of this business] (FT article).
What matters with this group is that directors are actively buying, and they appear to be managing the economic problems quickly and positively.
On November 8th 2007 (‘Housebuilders- too early to buy’), with Barratt above 500p, we warned of downside in the sector as a result of seeing significant directors share sales at Savills. I’m happy now to be looking for opportunities to invest in Barratt for the longer term below 75p.
View on Barratt Developments: Positive
Strength of signal: Strong (caveat: must be viewed long term ).
followthedirectors... a study of directors share dealings 