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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

International Personal Finance (IPF, 137p) is an emerging markets small loans provider to 1.8m provident-mexico-customercustomers : ‘We pride ourselves in providing home credit in a responsible well managed way.  We provide, small, unsecured cash loans – typically sums equivalent to £200 – borrowed over a short period of between six months and two years'( Company website).

International Personal Finance KNOW THEIR CUSTOMERS which must be unusual nowadays, and something the US mortgage providers and banks wished they’d stuck to. You would therefore have to assume that they knew exactly what was going on in terms of default risk and loan performance.

So it is interesting to see the Non Executive Deputy Chairman Ray Miles doubling his holding by buying 100,000 shares yesterday at 135.7p, taking him to a holding of 211,000 shares.

Following an Interim Trading Statement on October 22nd, the Executive Chairman Christopher Rodriguez bought just over 30,000 shares at 163p taking his holding to 218,562 shares, and a Non Exec Director Nick Page doubled his holding by buying 24,539 shares at 163p. Charles Gregson, another Non Exec,  bought 6350 shares at 157p to take his holding to 58,000 shares.

The next catalyst on IPF is probably the pre close statement in mid December. Last year this was on December 12th.

View on Internatioal Personal Finance: Positive- directors buying shares.

Strength of Signal: Strong- Four directors buying, significant increase in shareholdings, near term catalyst.

Addendum Dec 11th 11.50am: Stock is up 10% today. I know of no new news, but then I wouldn’t as I am not ‘in the market’. A look at the company website shows that the pre close update is scheduled for December 17th, next Wednesday. This is likely to be a significant positive catalyst in view of the directors buying activity mentioned above.

Mike Lawrie, CEO of Misys plc (MSY, 118p), and Chairman of Allscripts after Misys completed a purchase of the majority of the shares in the company, has bought 70,000 shares in Allscripts at $5.0921 (27th October- source London Stock Exchange– type MSY into Code box).

Lawrie already has a $1m shareholding in Misys (excluding his share options and performance plan shares). Does he now think Allscripts is the cheap (er) way to invest in the group?

Misys have outperformed the market by 25% since Lawrie last bought shares in March 2008. In ‘mmmmmm Misys – ‘Turnaround Strategy’ working? ‘ followthedirectors drew attention to the Misys directors share purchases: 

Misys’(MSY. 137p) CEO, CFO and Chairman have increased their positions by between 14%, 50% and 60% respectively, buying shares at between 135p and 136p last Friday.
So why look at Misys?
1. Significant increase in positions (50-60%)
2. Three senior bods buying £70-£135k of shares each
3. Misys is one year into ‘Turnaround Strategy’, which should go some way to insulating them from the expected downturn in demand from banking customers.
So one for the watchlist, or for the long term investors.

Lawrie last paid 136p for Misys in March 2008. At the time MDRX were trading at $9 or 450p.

Misys are now trading at 118p, a fall of 14%, and MDRX at $5.50 or 342p, 24% lower (in the weaker pound).

Is that a huge variance? No. But I note, looking at Bloomberg, that the short position in MDRX amounts to 6.2m shares. Maybe that will all unwind when the acquisition of shares by Misys is settled.

Either way, I suspect that MDRX offers better growth (Medical underpenetrated by technology, higher recurring revenues, greater certainty of revenues than Banks), more certain cost savings (from merger of Misys and Allscripts Healthcare businesses), and ‘cheaper’ shares (as US holders sell out of what is now essentially a UK controlled company).

So if you are looking to buy Misys, investigate MDRX as a possible alternative. Lawrie has a good track record in his share purchases.

For all Misys comments on this site click here.

For the latest presentation (October 23) by the management of Misys Allscripts go to the Misys website.

View on Misys: Positive

Strength of signal indicated by directors share dealings: Remains STRONG

Disclosure: I have a position in Misys plc

WSJ November 5th ‘Allscripts executives snap up shares’

Five Executive directors at GKN plc (GKN, 126p) have bought 386,000 shares between them this week, increasing their shareholdings in the group by 75% to around 896,000 (Source: London Stock Exchange).

Those directors are:

CFO William Seeger, CEO Sir Kevin Smith, CEO of Powder Metallurgy Andrew Smith, CEO of Aerospace Marcus Bryson, and CEO of Automotive Nigel Stein. It’s particularly encouraging to see Stein investing here, in view of the recent profit warnings from the car makers globally.

Stein bought 84,000 shares at 100.5p on October 28th, taking his holding to 209,000 shares.

Andrew Smith and Marcus Bryson were sellers near 330p in August 2007, so buying shares at 109p must feel good. Unfortunately CEO Sir Kevin Smith was not quite so savvy. He paid 360p in March 2007.

So GKN join the merry band of UK Engineering companies exhibiting director buying activity: Weir Group, Bodycote, John Wood, Senior and IMI.

See ’25 Directors buy shares in UK Engineering Companies’ (October 28th followthedirectors.co.uk)

View on GKN: Positive- Five directors buying shares

Signal Strength: STRONG- Five directors buying, investing GBP 400k between them, increasing holding by 75%

I’m not talking about the big cap FTSE 100 stocks here, but smaller FTSE 250 companies that are the global leaders in their field of specialty engineering.

Many of these companies have grown from a UK engineering base to have globally spread customers. They may also be companies with less near term economic exposure, protected by longer lead times, and also big beneficiaries of a weak Sterling.

It is unusual to see so many companies in one sector showing directors purchases, most of which have occurred in the last ten days. The directors clearly think trading conditions are better than those indicated by the share valuations in the stockmarket.

Weir Group (WEIR, 295p) : Three directors have invested GBP 350k in last two months.

Provider of engineering solutions (pumps, valves, pipelines, maintenance etc) to the mining, oil and gas, and power generation markets worldwide.

10x Half year 2008 operating cash flow. GBP 620m mkt cap.

Senior plc (SNR, 42.5p): : Six directors have invested GBP 70k in last two months.

Senior designs, manufactures and markets high technology components and systems for the principal original equipment producers in the worldwide civil aerospace, defence, diesel engine, exhaust system and energy markets.

6.8x Half year 2008 free cash flow. GBP 170m mkt cap.

IMI plc (IMI, 269p) : Three directors have invested around GBP 80k in last two months. 

IMI is an international engineering company, which operates primarily in the fluid controls and retail dispense areas. Fluid controls covers pneumatics, severe service valves and indoor climate products and services, while retail dispense includes beverage dispense and merchandising systems.
13.4x Half year 2008 operating cash flow. GBP 860m mkt cap.
John Wood Group plc (WG., 179p) : Four directors have invested over GBP 1m in the last week.
The international energy services company provides the oil and gas and power generation industries with engineering design, production support and industrial gas turbine services.
10.7x Half year  2008 operating cash flow. GBP 950m mkt cap (in FTSE 100, not FTSE 250).
Bodycote plc (BOY, 122p): Five directors have invested GBP 400,000 in last two months.
‘Bodycote is the world’s largest and most respected provider of testing and thermal processing services: Heat Treating, Hot Isostatic Pressing, Metallurgical Coatings and Testing – operating in 30 countries’ (strategy page on co website).

13.8x First half 2008 operating cash flow. GBP 400m mkt cap.

Read ‘Can Sulzer come back and bid for Bodycote? Ask the directors’  published at followthedirectors October 28th 2008.

Laird plc (LRD, 153p): Four directors have invested around GBP 70k in the last week.

Laird plc‘provide technology for an increasingly connected world’ in the form of  Electronic Components and Antennae enabling wireless connectivity (see co website for the lowdown).

10x First half 2008 operating cash flow. GBP 280m mkt cap.

Read: ‘Confident Laird directors delve into their pockets’ October 28th 2008 followthedirectors.

 

Disclosure: I have positions in Bodycote and Laird

Information sources: Company websites and London Stock Exchange.

[See also May 4 post: ‘Directors share sales outnumber buys- Is the market expensive?’]

[See also subsequent post on October 31st: ‘ Directors ARE buying shares. Buys vs Sells 10:1’]

A question many of you have is whether directors are currently buying shares, and presumably does that indicate a turning point in the market?

The straight answer is ‘no more than usual’.

If you use digitallooks excellent visual tools facility, you can ask them to show you the number of directors buying or selling over a certain period.

As at last Friday, the number of companies in the FTSE 350 indicating net directors dealings over GBP 50k over the period I asked for (1, 3 and 12 months) were as follows:

1 month to October 10 2008:

26 companies showed net selling over a cumulative GBP 50k, and 32 companies showed net buying.

3 months to October 10th 2008:

58 companies showed net selling, and 54 companies net buying

12 months to October 10th 2008:

144 companies showed net selling, and 130 companies net buying.

I’ve just today run the analysis for the last seven days (to October 13th) and it shows

4 companies showing net selling, and 9 companies showing net buying.

I believe that this is not statistically significant due to the short period and the low number of companies exhibiting activity. Please also bear in mind that digitallook uses data as announced by the stock exchange, which will include the receipt by directors of scrip dividends, share options, and Incentive Plan subscriptions.

In followthedirectors research I exclude all Incentive Plan and dividend receipts, and any sales that are made to pay tax on options exercised. I aim to look at shares sold to receive cash, or shares bought with cash.

For a list of directors dealing activity use the category criteria on the top left of this page, or click on the following: Directors Buys, Directors Sales.

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