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3i – close negative view with 67% relative underperformance

February 2, 2009 in Directors buying, FTSE 100, MEDIUM signal | Tags: | Leave a comment

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.

Rocket scientist director buys Cairn shares

January 19, 2009 in Directors buying, FTSE 100, MEDIUM signal | Tags: , | Leave a comment

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.

Next – take profits on directors share sale

January 15, 2009 in Directors selling, FTSE 100, MEDIUM signal | Tags: , | Leave a comment

Over a year ago, in December 2007, the CFO of Next (NXT, 1150p) increased his holding bynext-spring-summer-09 8%, investing GBP 170k at 1711p. I didn’t view this as a strong signal, as he was a solo buyer, unaccompanied by other directors, and increasing his holding by less than 8% (followthedirectors: ‘Next- Keen but not yet convinced’). Over the next six months Next underperformed the market by about a third.

What I missed in July 2008 was the turning point for Next. Three directors (Chairman Barton, CFO Keens, and Non exec Dawson all bought shares, investing between GBP 16,000 and 37,000 each. I missed it due to the low $$ value of each transaction. It missed my screen. Next duly outperformed the market by over 70% between July and now.

Last week Andrew Varley, the Group Property Director, sold 10,000 shares at 1234p taking his holding to below 70,000 shares (Source: London Stock Exchange). I do think this sale is significant: Varley has been on the board of Next for 18 years, the sale value is more than the combined purchase value of Keens, Dawson and Barton.

View on Next: Negative

Strength of signal: Medium

Liberty International shares continue to be vulnerable

January 11, 2009 in Directors selling, FTSE 100, MEDIUM signal | Tags: , | Leave a comment

Back in August last year, we noticed that despite excitement over a potential bid for Liberty International (LII, 522p), senior management in the form of a Harold Newton was selling shares. Unusual behaviour if you think there could soon be a bid on the table (see August 31st ‘Liberty International- PDMR selling’).

Since our caution, Liberty International have underperformed the Real Estate sector by around 20%, and the FTSE 100 by over 30%.

We believe Liberty International shares will continue to be vulnerable:

December 17th 2008 Harold Newton, a PDMR of Liberty, sold 19,000 shares at 495p taking his holding to 74,000 shares. Also

December 23rd and 24th William Black, also a PDMR of Liberty, sold 10,000 shares at between 482p and 488p, taking his holding to 100,000 shares.

View on Liberty International: Negative

Strength of Signal: Medium

For all comments on Liberty International (LII) click here.

Intertek directors test the waters with purchases

December 19, 2008 in Directors buying, FTSE 250 company, MEDIUM signal | Tags: | Leave a comment

Intertek (ITRK, 815p) on the 17th December announced a very upbeat trading statement, ahead of their December year end: ‘the group is expected to end 2008 with strong trading….expected to continue into 2009’.

This was followed by ditrectors share purchases  as follows:

CEO Wolfgang Hauser initiated a position by buying 1336 shares at 742p,

Non exec Debra Rade trebled her holding by buying 1000 shares at 742p, and

Chief Operating Officer Mark Loughead bought 2500 shares at 775p taking his holding to 14,485 shares.

These are not significant $$ investments, but are a significant increase in shareholdings by three members of the board, and 2/3rds of the executive board.

View on Intertek: Positive

Strength of signal: Medium (would be Strong if the purchases were larger in $$ terms)

Intertek summary taken from the corporate website:

Overview

Intertek is a leading provider of quality and safety solutions serving a wide range of industries around the world.

Our services take us into almost every field imaginable, such as textiles, toys, electronics, building, heating, pharmaceuticals, petroleum, minerals, food and cargo scanning. We operate a global network of more than 1,000 laboratories and offices and over 23,000 people in 110 countries around the world.

Intertek helps customers to assess their products and commodities against a wide range of safety, regulatory, quality and performance standards. Our services include testing, certification, auditing, safety, inspection, quality assurance, evaluation, analytical, advisory, training, outsourcing, risk management, and security services.
Our customers include some of the world’s leading brands, major global and local companies and governments. Shell, Canon, McDonalds, BP, IKEA, Nestlé, ExxonMobil, LG, GAP Inc, Valero, Panasonic, Tesco, ChevronTexaco, Marks & Spencer and Levi Strauss are Intertek customers. More than twenty governments including Bangladesh, Mozambique, and Saudi Arabia are also customers.

Melrose plc – working on FKI, four directors bought shares.

December 5, 2008 in Directors buying, FTSE 250 company, MEDIUM signal | Tags: , | 1 comment

On November 19th Melrose plc (MRO, 78p) reassured investors with an Interim Trading Statement saying that ‘trading is in line with expectations’ and ‘the integration of FKI is ahead of plan’.

So good news. This was supported by director buying on the 19th and 25th of November by four directors who between them bought over 1.3m shares at between 63p and 64.9p.

The three executive directors (Miller Exec Chairman, Roper CEO and peckham COO) increased their positions by an average of 11%.

Non exec John Grant effectively initiated a position by buying 153,000 shares, taking his holding to 164,000 shares.

My thoughts?

Definitely one for the watch list. Positive due to four directors buying, decent $$ amount, but not a STRONG signal due to limited % increase in holdings. Next news is unlikely to be until early March, when full year results to end December will be announced.

Look for further director share buying this month, before the ‘window’ for directors dealing activity closes. This could cause us to reinforce our positive view on Melrose.

Another engineer with directors buying shares. See here for all comments on the UK Engineering sector.

View on Melrose plc: Positive- Four Directors buying.

Strength of Signal: MEDIUM- Insufficient % increase in holdings to warrant a Strong view, Four directors buying, Good $$ committed.

Sources: London Stock Exchange, Digitallook

Eaga – close ‘STRONG’ positive signal with 27% relative return

November 28, 2008 in Directors selling, FTSE 250 company, MEDIUM signal | Tags: , | Leave a comment

Eaga (EAGA, 112.5p), the UK heating system provider for social housing, has announced that the CEO and CFO are each selling 1.1m shares ‘to satisfy tax liabilities incurred at IPO which are due shortly, ……..and to provide an element of liquidity‘ (Company statement November 25th, source London Stock Exchange).

In April eaga directors bought shares, taking advantage of a depressed share price resulting from costs concerns primarily related to copper prices. This prompted us to look at eagas valuation, and its comparison with Connaught (CNT, 366p), a similar company, where directors had been selling shares.

Since April 30th ‘Connaught (directors selling) vs Eaga (directors buying)‘ Eaga are down 13.5%, the FTSE 250 index is down by over 40%, and Connaught are down 8.67%.

If the CEO and CFO are selling shares, then maybe we should also.

So we close our positive view on eaga with a 27% relative performance vs the FTSE 250, and a -5% relative performance vs Connaught.

View on eaga- Negative – directors selling shares.

Strength of signal- Medium

For all followthedirectors comments on eaga click here.

Share transactions:

John Clough CEO sold 1.1m shares at 110p taking his holding to 5.236m shares.

Ian McLeod CFO sold 1.1m shares at 110p taking his holding to 3.982m shares.

David Rough buys back into Xstrata at 1/5th of his sale price in March.

November 26, 2008 in Directors buying, FTSE 100, MEDIUM signal | Tags: | Leave a comment

On October 12th I pointed to Xstrata (XTA, 862p) non execs purchases as an early positive (although not strong) signal for Xstrata “Xstrata non execs catch a falling knife”.

I was particularly impressed by the volume and timing of selling by Xstrata management earlier in the year:

“If we look back to earlier this year, a number of executive directors including Trevor Reid (CFO), Santiago Zalmdumide (Executive Director), and Michael Davis (CEO) all exercised options and sold all their shares at between 3470p and 4342p (source: Company website, Digitallook, London Stock Exchange)” .

Since October 12th Claude Lamoureux (non exec) has invested another GBP 50k or so by buying 5000 shares at 1093p (November 7th), and David Rough (non exec) has bought 3000 shares at 681p (November 21st).

I use this post only as an opportunity to highlight Mr Roughs investment skills:

Rough sold 3605 shares in Xstrata at 3508p in March 2008.

Rough bought 3000 shares in Xstrata at 681p on November 21st 2008.

David Rough has an extensive history in investing, retiring in 2001 from his position as Chief Investment Officer for Legal and General, but maintaining non exec positions at Xstrata, Land Secs and Friends Provident.

Mr Rough, who joined L&G from Royal Insurance in 1989, earned a reputation for being almost alone among fund managers in openly criticising companies or institutions for treating shareholders in a shoddy way. He is also credited with being behind the fast growth of L&G’s fund management arm, which has expanded from £18.5bn to £113bn in the last 10 years and was adding £1bn a month by last year. (Independent October 19 2001).

View on Xstrata- remains positive – directors buying.

Strength of signal- MEDIUM- three non execs buying shares. Will turn to ‘strong’ when we see an executive director buying shares.

 

 

IMI CEO starts to buy back shares he sold in May- for half the price

October 27, 2008 in Directors buying, FTSE 250 company, MEDIUM signal | Tags: , | Leave a comment

IMI plc’s (IMI, 268p) CEO MJ Lamb has started to buy back shares in his company (co website).

Martin Lamb sold 105,000 shares at between 513p and 517p back in May this year. IMI are now trading at almost half that level now, in the 260p’s.

Lamb is dripping his money back in: Mrs Lamb bought 10,000 shares at 288.5p on October 14th. Lamb himself bought 5000 shares at 260p on October 24th.

Lambs colleague, CFO Douglas Hurt, has also been putting a few $ to work, with his wife buying 6500 shares at 288.5p, also on October 14th.

If you take a look at the IMI fact sheet (1MB download) you’ll see a group with a geographically diversified sales profile, which could presumably be a longer term beneficiary from weak Sterling.

View on IMI plc: Positive, directors buying

Signal strength: MEDIUM – requires a larger $$ amount to be invested, as well as more directors, to warrant a Strong rating.

Harvey McGrath puts 1 million pounds into Pru shares

October 23, 2008 in Directors buying, FTSE 100, MEDIUM signal | Tags: , , | Leave a comment

The biggest purchase for years by a director or non exec at Prudential (PRU, 333p), Harvey Mcgrath on Tuesday bought 291,000 shares at 343.29p, investing just shy of one million pounds (Source: London Stock Exchange).

McGrath was appointed a non exec of Prudential on September 1st, and is to take up the role of Chairman in the New Year. He worked at Man Group in various roles, moving to CEO in 1990 to 2000, and Chairman from 2000 to 2007 (Prudential website, Man Group website).

What is a million pounds to McGrath? Back in 2005 in the Andrew Davidson interview in The Times, he was said to be worth GBP 120m. That was with the Man share price at 20 quid. Man are now trading at under 4 pounds, and I’m sure, having run a hedge fund group, that McGrath will have hedged his position in Man. So let’s have a guess at GBP 75m.

In that case an investment of 1 million of the Bank of Englands finest folding doesn’t seem like such a huge punt.

But what this share purchase is is a vote of confidence in Prudential’s strategy to explore a possible purchase of AIG’s Asian business, and a vote of confidence in the groups Capital levels, and longer term probably a great money making opportunity by a hugely successful operator in the financial markets (Independent: Prudential reassures investors on capital levels).

How does this purchase rank on the followthedirectors scale? CEO Tucker bought shares in Prudential back in mid September, investing GBP 100k at between 485p and 511p, but increasing his holding by only 20k shares to 1.5m shares.

I’d like to see Tucker and McGrath followed by other directors of Prudential for this purchase to warrant a ‘Strong’ signal.

View on Prudential: Positive- directors buying

Strength of Signal: MEDIUM

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