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Yesterday Carnival (CCL, 1411p) announced hat two directors had sold shares.
In fact both Peter Ratcliffe, Board director, and David Dingle, CEO of Carnival UK, had both exercised options and sold the resulting shares, Ratcliffe realising GBP 240k, and Dingle realising GBP 45k.
If a director sells sufficient shares to pay his/her taxes due on the options exercise then I consider the transaction a ‘neutral’ one. If a director sells all the shares exercised then I consider it a disposal, and a negative indicator.
So these transactions I view as negative for the shares. Ratcliffe realised GBP 150k earlier this month through a sale of 12,500 shares.
Directors have been selling since August last year. Carnival shares have performed in line with the market over the period.
View on Carnival: Negative
Strength of Signal: STRONG
For all previous posts on Carnival see here.
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
Carnival Cruise Lines (CCL, 1420p) are being squeezed.
‘The average passenger’s age is 45+’ (http://cruises.about.com), and those potential customers of Carnival are being squeezed in their spending power by falling interest rates, falling pension and savings valuations, and other pressures on them such as highlighted in Saturdays Telegraph:
“A Daily Telegraph survey – the first of its kind since the recession began – highlights the heavy toll being taken on Britain’s so-called “Babygloomers”.
Almost one in ten adults are having to contribute to their parents’ upkeep, the research found. The Norwich Union research suggests more than 1.3 million adults aged between 17 and 65 are paying their parents more than £250 each month, with some paying up to £1,000.
Many pensioners have found themselves struggling as their income from savings has virtually disappeared following the drop in interest rates. As a result, they have been forced to turn to their children for help” (Telegraph.co.uk February 14th 2009).
Carnival directors Howard Frank and Robert Dickinson were sellers back in June and August last year, raising over $4 million between them through share sales.
Peter Ratcliff, the former CEO of Princess Cruises Intl, on Febraury 2nd sold 12,567 shares at 1245p, raising over GBP 150k.
The stock since August has performed in line with the market, in my view rescued by falling oil prices. I can imagine that booking a cruise has a long lead time, so any bad news on Carnival is likely to appear later in the consumer cycle rather than sooner.
Carnival cut their dividend in November, saving over $1bn a year.
I continue with my negative view on the shares, with a ‘STRONG’ signal from directors share sales.
For all posts on Carnival click here.
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)
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 ).
Savills update:
There is no new news at Savills (SVS, 252p), save improving sentiment on UK rate cuts, which has resulted in great share performance (up 16% re FTSE 250 since Savills director Simon Hope sold shares on September 12th, and up 14% relative to the market since the group announced a profit warning on October 17th).
I do however expect a pre close statement from Savills next week, as the ‘Interim Management Statement’ [Profit warning] of October 17th was related to ‘recent weeks ….transaction volumes’, and two months in this market is a long time.
The other risk that arises comes from the ‘stepping down’ of the Finance Director Mark Dearsley, in what must be financially pretty stressful times for a business geared to transaction volumes. ‘His exit will mark the second departure from Savills this year and comes just weeks after the company issued a profit warning’ (Reuters November 26th).
So I stick to my guns on Savills, noting that four directors have sold shares between 295p and 359p this year, and that the risks remain on the downside.
For all previous comments on Savills on this website, including directors share sales and the profit warning, click here.
View on Savills – remains negative
Strength of Signal- Remains STRONG
The CFO of John Wood Group plc (WG. , 185p), Alan Semple, yesterday bought 50,000 shares at 166p, taking his holding to 1.164m shares.
Whilst this of itself is not significant, there are a few factors which continue to support a positive view on John Wood :
- Semple sold 92,000 shares in April this year at 453p. This is his first transaction since then.
- Sir Ian Wood, Chairman, also invested in John Wood last week, buying 500,000 shares at 164p on December 5th, taking his holding to 31.1m beneficial and 60m non beneficial.
- Six other directors have bought shares, in October. In total 8 directors have bought 1.296m shares in the last six weeks, investing over GBP 2m between them.
- The ‘Full year trading update’ is to be announced on the 17th of December.
Our last comment on John Wood Group was on October 28th at 179p ‘Four directors have invested over GBP 1m in the last week’. Within a week John Wood shares were trading 100p higher, helped by a big bear market rally.
I expect a positive, reassuring statement next week.
Positive view, encouraged by a STRONG signal.
Sources: Company website, London Stock Exchange, Digitallook
See also note of January 20th : ‘Burberry Delights’.
Last week Burberry (BRBY, 170p) warned ‘of tough conditions going into Christmas’ (Telegraph 18 November).The shares fell 12%, and then management started buying.
A mixed message you think?
Angela Ahrendts, Burberrys CEO, says ‘We’ve seen it all’. She refers to having a very seasoned management team, and plenty of experience of tough times: SARS, 9/11, Asian crisis.
Ahrendts herself has plenty of experience, having held senior positions at Donna Karan, Henri Bendel and Liz Claiborne before landing as CEO at Burberrys in October 2005, taking the place of Rose Marie Bravo who resurrected the brand.
Do Ahrendts team believe they can battle it out?
It seems so. John Peace (Chairman), Joy Frommer (PDMR) and Pascal Perrier (President Asia Pacific) have all joined Angela Ahrendts in buying shares on November 20th and 21st, investing almost GBP 400,000 between them, at prices between 172p and 174p, and increasing their holdings by an average of 40%.
They were joined by three of the four non execs, Bowman, Tyler and Carter, who invested about GBP 74,000 between them, increasing their positions by an average of 80 odd %, and paying between 176p and 184p on November 19th.
The only exec board member who didn’t buy shares was CFO Stacy Cartwright, who may still be suffering shellshock from having paid just shy of 500p five months ago. Ahrendts paid the same price for 135,000 shares.
In hindsight, the best sales of stock were made by Rose Marie Bravo, as she managed her exit from the group, selling 4 million shares at 421p and 446p between July 2005 and July 2006.
The worst purchases were made by Ahrendts and Cartwright in June 2007, when they paid within 3% of the all time high, buying 82,000 and 37,000 shares respectively at 701p. Cartwright wisely cut her losses, selling at 659p within two months.
I feel happier with these purchases than I did when Ahrendts paid 496p in June, because they are supported by other board members, both executive and non executive directors, as well as two senior managers of the group.
View on Burberry: Positive- directors buying shares
Strength of Signal: STRONG- Five directors of seven buying shares. Increase in shareholding averages above 40%.
followthedirectors... a study of directors share dealings 