The Compass points South (after 50% outperformance)

February 8, 2009 in Directors selling, FTSE 100, MEDIUM signal | Tags: , | 1 comment

Miguel Ramis, Compass’ Head of European Operations, not a board director, but an individual of PDMR (person with direct management responsibility) has sold 120,000 shares at 355.89p leaving him with 548,000 shares (London Stock Exchange February 6th 2009).

Compass Group (CPG, 355p) have been a wonderful outperformer relative to the market, up 50% since we turned positive on the shares on March 18th (‘followthedirectors: The Compass points North‘) as a consequence of share purchases by Roy Gardner the Chairman, and Richard Cousins the CEO.

If you remember, the market had concerns over food price inflation, and whether or not Compass would be able to recover increased costs in their contracts.

The company statement announcing Ramis’ share sale describes him using the proceeds ‘used in repect of settlement of the specific lending obligations‘.  Doesn’t that mean he’s paying down a loan?

I interpret this as a lame excuse for his share sale, and I am happy to take profits on shares bought in March at 309p, a performance 50% better than that of the FTSE 100 index.

View on Compass Group: Negative

Strength of Signal: Medium

Directors buying interest falls away in a sideways market

February 4, 2009 in Market musings | Tags: , , , | Leave a comment

Back in October last year, as the FTSE 100 collapsed by 20% in a week, UK company directors stepped in and bought shares, with buys outnumbering sells by 5:1*.

In the months since then, buying has fallen away, to 2.75:1 in November*, slumping to 1.3:1 in December* and in the latest month, January, buys outnumbered sells by only 1.15:1*.

The 5:1 ratio seen in October matches an exact same ratio for December 2002, only months before the market rallied strongly, and is similar in scale to August 2002’s 4:1 ratio.

What to do? Look for buying opportunities. You are highly likely to see directors step in strongly as buyers if/when we see another significant setback in the market.

For all our earlier market related thoughts on followthedirectors see Market Musings.

*source: Digitallook.com

IG Group- Sell signal as COO Hetherington sells 700,000 shares

February 2, 2009 in Directors selling, FTSE 250 company, STRONG signal | 1 comment

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

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.

easyjet CEO Harrisons share sale – a significant signal

February 2, 2009 in Directors selling, FTSE 250 company, STRONG signal | Tags: | Leave a comment

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)

Marks and Spencer – non exec Du Plessis initiates position

January 22, 2009 in Directors buying, FTSE 100, WEAK signal | Tags: , | Leave a comment

The risk to Marks and Spencer (MKS, 222p) was obvious from what I perceived to be exposure to a customer base with limited spending power. The whiff of Lily of the Valley with a faint hint of urine as I descended the escalator to the underwear and luxury foods hall at Marks’ Aberdeen branch betrayed the identity of a large part of the  groups customer base, the female pensioner.

When the mother in law switched her twice weekly shop from the nice fish and pre cut green beans in the food hall at Marks to the scrums at ASDA was when the profit warnings started. With UK interest rates collapsing, the purchasing power of this segment of Marks’ customer base has now evaporated.

But we have seen directors starting to buy shares, although in limited volumes.

I was tentative when Marks’ Deputy Chairman Sir David Michels picked up 84,000 shares in July and August between 249p and 265p (See ‘Marks- Sir David Michels increases holdings by 50%’).

Marks have however outperformed the index since August 16th, by 8%.

I still am tentative when I see Non Executive Director Jan du Plessis buy 20,000 shares at 222p (January 21st 2009), initiating a position in the group having been appointed non exec on November 1st 2008.

Du Plessis earned his stripes as CFO of the Swiss and South African luxury goods group Richemont for 16 years to 2004.

My view on Marks remains unchanged until I see more directors committing capital in bigger $$ amounts, something which may happen soon. Come on Mr Rose.

View on Marks and Spencer: Positive

Strength of Signal: Weak (requires further director buying to move towards Strong)

For all Marks and Spencer comments on this site, click here: Marks and Spencer

Burberry delights with like for like only down 3% and additional costcutting plans.

January 20, 2009 in FTSE 250 company | Tags: , | 1 comment

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.

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

Barratt – look for buying opportunities

January 15, 2009 in Directors buying, FTSE 250 company, STRONG signal | Tags: , | 2 comments

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 ).

barratthomes

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