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Premier Foods (PFD, 32.25p) share price has been in turmoil recently, over concerns that the group ‘faces challenges over reducing its £1.8 billion of debt’ (Telegraph article October 18th).
The group on Friday October 17th issued a statement aimed to calm concerns over the balance sheet:
‘Premier anticipates meeting its financial covenants at 31 December 2008. In current market conditions the Board is not pursuing any current plans to issue equity or equity linked products.’
Directors across the board followed up on the statement with share purchases (see regulatory announcement here) thereby sending a signal to the market that they meant what they said, and were prepared to commit their own funds to buy shares.
Directors and non execs bought 862,000 shares at around 32p, committing GBP 275k.
Are these purchases of value in stock selection?
Yes:
- 7 directors and 4 PDMRs have bought shares,
- Management have committed GBP 275k of their own cash
- Management have increased shareholdings by between 12% and 600%
No:
- The directors have a poor track record. They have been buying shares all the way down from 247p in September 2007.
I’m afraid the poor track record means that the share purchases do not warrant a ‘STRONG signal’ on the followthedirectors ‘significance of directors dealing’ scale.
View on Premier Foods: Positive- Directors buying
Significance of signal: MEDIUM strength.
September 12th: Simon Hope, Savills (SVS, 205p) Executive Director with responsibility for Capital Markets, sells 62283 Savills shares at 295p, taking his holding to 87,547 shares and raising GBP 183,797.
September 16th: followthedirectors comments: ‘Savills – further to fall – Directors sell’
October 17th : ‘Savills Says Earnings Will Miss Analysts’ Estimates’ (Bloomberg article) : ‘this year’s pretax profit will miss analysts’ estimates because of the slump in transactions caused by the credit-market turmoil.’
I know that in these markets five weeks is a lifetime, but do you not think the board of Savills have had regular discussions about the risk to their profits and earnings in their weekly board meetings?
If you had followed Savills directors dealings and the followthedirectors commentary, then this news would be no surprise to you.
Find below the performance you might have achieved if you had followed our commentary (I list here the dates of my comments, and the share price performance between them):
November 8th (followthedirectors say ‘don’t buy’). Performance to March 10th SVS down 5%
March 10th (‘results wednesday, watch out’) Performance to August 4th, SVS down 35% absolute, or down 13% relative to the FTSE 250.
August 4th (‘time to buy?‘) to September 12th, SVS up 33% absolute, or 32% relative, but Hope didn’t announce his sale until yesterday, so use August 4th to September 15th, SVS up 23% absolute, or up 25% relative.
September 16th (‘further to fall’) to today October 17th, SVS down 23%, but up 5% relative to the FTSE 250.
I would suggest that the risk in Savills remains distinctly on the downside.
For all comments on Savills click here or type Savills into the search box on the left.
When I wrote my post of September 15th ‘Hargreaves Lansdown- more selling, signal strength now STRONG’, I was unaware of the reason for so many share sales.
The reason directors of Hargreaves Lansdown (HL. 182p) have been selling is that this is the anniversary of their listing (see Citywire article here), and the lock up for part of their shares falls away.
This in my mind justifies the share sales as the directors are probably diversifying their financial assets. Although you might question whether they would all rush for the exit if there was good news ahead!
As a result of this I believe these sales have a lower value to investors, and I am moving the Signal strength indicator from STRONG signal to WEAK signal.
For all comments on Hargreaves Lansdown click here.
Thomas Cross (CFO) and David McFarlane (CFO) pretty much called the top on Dana in June this year when they exercised options to buy shares at 236p and 414p respectively, and then sold them at 1886p and 1881p respectively.
They took GBP 4 million and GBP 1.76m respectively out of Dana Petroleum (DNX, 1037p) within 5% of the high (1972p in May).
So it is interesting to see a whisper of positive news just this last week as two directors buy shares.
Brian Johnston, a non exec, on October 8th bought 6000 shares at 908p, inititaing a position in the company.
Two days later, on October 10th, Stuart Paton, the Technical and Commercial Director, bought 9179 shares at 894p, taking his position to 32,529 shares.
Between them they have committed GBP 137k to the company, which is minimal when compared with the money taken out by the CFO and CEO in June.
It is however an important signal to investors, which may establish a level of support for the shares.
Please also note that we have recently seen hesitant director purchases in other natural resources stocks including Xstrata, Cairn Energy, and Premier Oil.
View on Dana: Positive, Directors are buying shares
Strength of Signal: Medium
See comment of October 19th: Dana Petroleum – CEO invests at 853p having sold at 1886p in June.
On September 26th in ‘ITV directors dip their toes in the water- add to watchlist’ I noted purchases by three directors/senior managers at ITV (ITV, 39.5p) . I wanted to see further purchases before I bought the shares.
Over the last fortnight two non execs have also bought shares, in limited size, taking the number of directors buying shares to five.
Heather Killen, non exec, on October 1st bought 22,000 shares at 43p, initiating a position, and on October 9th Agnes Touraine, also a non exec, bought 100,000 shares at 37.5p.
Although these are relatively small purchases in $$ terms, it should be noted that all the five directors who have purchased shares (Griffiths- CFO, Fincham- Director of Television, Russell- Deputy Chairman, Killen- non exec, and Touraine – non exec) have initiated positions in ITV in the last month.
As a result of this, and the number of directors buying shares, the recent transactions act as a STRONG signal to investors.
View on ITV: POSITIVE- Directors buying shares
Strength of Signal: STRONG
Link to all comments on ITV.
Back in May this year four executive members of the board (White, Farley, Kiloran and Bryant) of Persimmon (PSN, 377p) sold shares at 567p. Within eight weeks Persimmon shares were trading at 220p.
On September 30th we saw the first purchase of shares at Persimmon by the senior independent non executive director David Thompson. Mr Thompson invested almost GBP 80,000 for various members of his family by buying 20,000 shares at 398p.
Thompson increased his (and his familys’) holding in Persimmon by 50%, taking their holding to 60,000 shares.
These purchases don’t score highly on my ‘significance’ rating, because only one director is buying shares. I thought it worth recording though due to the size (GBP 80k) and the increase in shareholding (50%).
View of directors dealings: Positive- director is buying shares
Significance of the transaction: Low / Weak as only one director buying shares
In a year of turmoil for ITV (ITV, 43.5p) due to advertising slowdown, a switch away from viewing TV to computers and many other ongoing dramas, the ITV share price has fallen from 121p high in May last year, to a low of 38p in July this year.
If you look at the recent press comment, there is an ongoing discussion with Ofcom over how much ITV can cut back to reduce its costs.
In this time of turmoil it is therefore intriguing to see directors starting to buy.
Ian Griffiths, CFO, on September 10th bought 100,000 shares at 47.2p, initiating his holding, only a day after he was appointed (did he feel duty bound to buy shares to shares?).
Peter Fincham, Director of Television, on September 24th bought 350,000 shares at 42.75p, also initiating a position.
And Sir George Russell, the Deputy Chairman, via Lady Russell, bought 57,000 shares at 43p on September 24th, taking their holding to 62,000 shares.
I’d like to see a few other directors buy shares at these levels, especially when they’ve paid prices 50-150% higher in the past. In particular Cresswell, Ormerod and Crosby.
In the meantime these transactions merit a ‘WEAK signal’, with the potential to be upgraded pending further director purchases.
Tempus on Wednesday declared that ‘Tate and Lyles share price caning is an opportunity to buy back in’, after the share price fell 10% over the judges decision of a patent case on sucralose.
Clearly management at Tate and Lyle (TATE, 384p) agree with Tempus. Six directors bought shares at just over 380p on Wednesday and Thursday this week, investing just under GBP 30k each on avearge, and increasing their holdings by an average of close to 60%.
Directors have been active at prices between 380p and 440p since October last year, taking the total number of directors (exec and non exec) buying shares to seven out of a board of 10, a significant proportion.
I’d love to see a bit more cash committed by directors, but in light of the consistent buying over the year, the % increase in holdings, and the high proportion of the board participating, I believe these share purchases to be a STRONG signal.
Signal strength: STRONG
For details of directors activity see www.digitallook.com, type in TATE, and choose Director Deals tab.
followthedirectors... a study of directors share dealings 