Are Sports Direct shares now cheap, at 1/8th of the float price?

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

Sports Direct’s Mike Ashley has been having a tough time ‘New Pain for Ashley’ (Evening Standard 23rd October). Sports Direct International floated in February 2007 at 300p and has headed one way since then.

Are Sports Directs (SPD, 38.25p) shares now cheap?

Ask David Singleton, a non executive director. He bought on October 23rd 150,000 shares at 37.6p, taking his holding to 153,000 shares.

‘Dave Singleton was appointed a Non-Executive Director of the Company on 25th October 2007.  He spent 25 years with Reebok International Limited.  He stepped down in April 2007 he helped successfully to integrate Reebok following its acquisition by adidas Group in January 2006.  For eight years he was Vice President, Northern Europe Region & UK and since 2003 he was Senior Vice President Europe, Middle East & Africa’  (Sports Direct website).

Maybe the Sports Direct share price has been inextricably linked to the price of England shirts.

England shirts went on sale on 6th February 2007 at GBP 39.99. They are now for sale at GBP 4.49. That is 11.2% of the original price. Sports Direct shares are trading at 12.7% of the original floatation price.

Let’s hope the price of England shirts starts to go up !

 View on Sports Direct: Positive- Director buying

Strength of Signal: WEAK- only one director buying.

Shirt prices:

GBP 39.99 (http://www.anfield-online.co.uk/store/new-england-home-shirt-2007.html)

Ad above for GBP 4.49 (http://www.sportsdirect.com/)

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

The Restaurant Group non exec trebles holding.

October 22, 2008 in Directors buying, FTSE Small Cap, STRONG signal | Tags: , | 1 comment

The Restaurant Group (RTN, 117p) has outperformed the FT Small Cap by 20%, or the FT All Share by 15% since it was written up here on March 14th : ‘Consumer stocks at risk? Not TRG according to directors‘.

When impressive interim results were announced in August, analysts warned of the impact of cost pressures on the group: ‘Frankie and Bennys profits surge comes with a warning’ (Scotsman 30/8/08). Maybe with collapsing commodity prices those cost pressures are now turning into benefits?

Our opinion on The Restaurant Group remains positive, and is reinforced by the purchase of 200,000 shares at 104.2p on Monday October 20th by John Jackson, a non executive Director, trebling his holding to 300,000 shares.

Opinion on Restaurant Group: Positive

Strength of Signal: Remains STRONG

Charter plc – more directors buying = Strong signal

October 22, 2008 in Directors buying, FTSE 250 company, STRONG signal | Tags: , | Leave a comment

Only three days ago, on Sunday October 19th, I highlighted directors buying at Charter plc (CHTR, 390p) at between 314p and 345p: Charter plc – directors buy after shares fall by 2/3rds this month.

I wanted to see more than two directors buying for directors dealings in Charter plc to justify a Strong signal to investors. A further two directors have announced their purchases.

On October 17th non executive Chairman Lars Emilson bought 5,000 shares at 320p, taking his holding to 10,000, and yesterday John Biles, another non exec, bought 5000 shares at 411.75p, taking his holding to 8,000 shares.

As a result of these purchases the Signal strength for directors dealings exhibited at Charter plc goes to STRONG, with a positive view.

View on Charter plc: Positive, directors buying

Signal strength: STRONG.

Senior plc directors fly in to buy shares

October 22, 2008 in Directors buying, FTSE 250 company, MEDIUM signal | Tags: , | Leave a comment

Senior plc’s (SNR, 50p) trading statement gets a positive reception from the press, who point to both the low valuation but also the risk to orders from the ongoing Boeing strike:

Telegraph article: ‘Questor says Buy’.  Times article :‘those with mettle should buy’.

The Directors of Senior however have been busy buying shares in the market.

  • September 18th: CFO Simon Nicholls bought 5000 at 85p initiating a position.
  • October 9th: Non exec Martin Clark (for Mrs Clark) bought 30,000 shares at 72.5p, taking their holding to 90,000 shares.
  • 20th October: Non exec Michael Steel bought 20,000 at 40p initiating a position.
  • 21st October: Non exec David Best bought 20,195 at 49.15p taking his holding to just over 40k.
  • 21st October: David Ryan, a PDMR, bought 10,000 shares at 42.5p, initiating a position.
  • 21st October: Simon Nicholls, CFO, averaged down by buying 15,000 shares at 46p taking his position to 20,000 shares.

So you can see what the directors of Senior think about their share price!!

Unfortunately these purchases don’t score as high as they might, despite having five directors /PDMRs buying shares and all initiating a position or increasing holdings by at least 50%.

I’d love to see more $$ committed to move this to a STRONG signal. The average purchase is less than GBP 10k. 

View on Senior plc: Positive

Signal strength: MEDIUM (need to see greater cash commitment for this to be a Strong signal).

Are hormone levels and fear affecting your ability to make judgments?

October 21, 2008 in Market musings | Tags: , , , | Leave a comment

‘Cortisol is likely  to rise in a market crash and, by increasing risk aversion, to exaggerate the market’s downward movement.’

I listened last night to an interview with Dr John Coates, a former Wall Street trader and the lead author of research published in April by the Judge Business School in Cambridge, analysing the impact of hormone levels (testosterone and cortisol) on traders performance and their ability to make judgements.

Coates goes on to say in the interview:

‘Cortisol, if you’re exposed to it chronically at high levels for a long period of time, it can have a devastating effect on both the mind and the body. In terms of affecting traders decisions what it can do is affect the memories you recall. You tend to recall bad memories, negative precedents. You tend to see risk where maybe there is none. You become fearful, you feel anxiety. I think that decreases a trader’s appetite for risk. While testosterone is causing people to take too much risk cortisol is causing people to take too little risk in the crash.’

I had also earlier read Tim Prices excellent weekly commentary  ‘Diamonds amongst rubble’ suggesting that the [orchestrated?] inducement of large amounts of fear in all of us was necessary to get the financial rescue packages that the banks were looking for.

So are we all now dithering in overdoses of Cortisol induced by fear?

Can we no longer make rational decisions?

How long does it take to wear off?

Has the ‘market’s downward movement’ already been exaggerated?

People react in different ways to fear. Maybe we should worry less about the fear and more about balancing fear with opportunity.

Sources:

Judge Business School Press Release: ‘Testosterone levels predict City traders’ profitability. Research provides insight into irrational decision-making during crashes and bubbles.’

The Naked Scientist: Hormones and the Money Markets (access to interview transcript and podcast). 

Tim Prices Blog: The Price of Everything.

Getting in touch with your feminine side: An interesting blog article discussing allegations of hormone management amongst traders at SAC Capital.

Food for thought- Premier Foods directors buy en masse

October 21, 2008 in Directors buying, FTSE 250 company, MEDIUM signal | Tags: | 1 comment

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.

Charter plc – directors buy after shares fall by 2/3rds this month.

October 19, 2008 in Directors buying, FTSE 250 company, MEDIUM signal | Tags: , | 1 comment

This stock really has plummeted. I suppose welding and air and gas handling are hugely sensitive to the economic cycle (Charter website). But is the 67% fall in share price since October 1st more than discounting the potential impact of a recession?

A look at the numbers for Charter plc (CHTR, 326p) shows great cashflow generation and decent asset backing, but little dividend payout. But as in anything only time will tell if the two directors who bought shares on Friday are right.

Non exec John Neill bought 20,000 shares at 345p taking his position to 87,000 shares, and

CEO Michael Foster, through his Mrs Mariam Foster, bought 10,000 shares at 314.25p, taking his/their holding to 33,000 shares.

Only five weeks earlier Neill had paid more than double the price. And Foster paid above GBP 10 in November last year.  So I’d like to see support from other directors thereby building a consensus with which I’d be happier to buy shares myself.

In the meantime, one to watch.

View on Charter plc: Positive- directors buying shares.

Strength of Signal: Medium. Need to see more directors buying to merit a STRONG signal.

Dana Petroleum – CEO invests at 853p having sold at 1886p in June.

October 19, 2008 in Directors buying, FTSE 100, STRONG signal | Tags: , , | 2 comments

Only last week, October 15th, followthedirectors wrote ‘Technical director thinks DANA Petroleum undervalued‘.

One day later. the CEO Tom Cross, and one of the non executive directors Philip Dayer, also bought shares in Dana Petroleum (DNX, 831p).

Non exec Philip Dayer bought 5787 shares at 864p, taking his holding to 9387 shares. CEO Cross bought 43490 shares at 853p, taking his holding to 1,044,890 shares.

So this isn’t a significant move on Cross’s part. But when you look at the $$ amount invested (GBP 370k), and the coincidental purchase of shares by three other directors in the week (Brian Johnston non exec, and Stuart Paton Technical and Commercial Director, as well as Dayer above), then Dana Petroleum starts to look interesting.

Also remember (see link to comment above) that Cross and his CFO McFarlane were diligent enough to exercise and sell shares in June at near to GBP 19, within 5% of the high for Dana. You have to give them some credit for their timing.

View on Dana: Positive, directors buying

Signal Strength: STRONG (up from Medium) on the news that now four directors out of the board of eight are buying shares.

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