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I want to talk about share purchases made by BT Group plc (BT.A, 92.5p) Directors and PDMRs on June 1st, namely Ian Livingstone, Tony Chanmugan, Sally Davis, Rod Louwhoff, Gavin Patterson and Al-Noor Ramji, who between them bought over 1/2 million shares at 89p (source: London Stock Exchange)

Warning bells ring as soon as I see this number of directors buying shares all at the same time.

So a close look at the BT Group Annual report 2009 (May 13) reveals the reason as follows:

Page 58: ‘All executive directors and members of the Operating Committee will, immediately after payment, use their annual cash bonus for 2008/2009, after tax, to purcahse shares in the company’.

Page 60: ‘The CEO is required to build up a shareholding of 2x salary and the remaining directors 1.5x salary.’

Looking at the declared cash bonus for Livingstone of 343,000 pounds, netting of 40% tax, gives around 200,000 pounds. Livingstone bought 224,000 shares at 89p on June 1st.

We thoroughly support this requirement to purchase shares, as it aligns the Executive members of the Board and the Operating Committee with shoreholders, but it means that for ‘signals’ generated by directors dealings we need to look at activity by non execs.

Sir Michael Rake, the non executive Chairman, has been buying shares. He bought 12,000 at 166p in September, 20,000 at 127p in November, and 28,000 at 72p in March.

These purchases are relatively small, and have not (yet) been reinforced by activity by other non execs.

Further buying activity by other non execs would send a positive signal.

View on BT Group: Neutral (no signal from directors dealing activity).

See other comments by followthedirectors on BT Group here.

We’ve found that non execs outperform execs by somewhere between 7% and 11% amongst the directors dealing transactions we have observed over the last 18 months. We are unsure as to whether this outperformance is a feature of bear markets, or will continue when share markets are rallying.

Our thesis when we started followthedirectors was that non execs would have a better ‘handle’ on both valuations and the competitive and economic environment due to their involvement in  activities outside the firm on whose board they sit.

A few transactions over the past week where only non execs have been buying shares are worth noting as follows:

Vodafone (VOD, 116p)

announced that on May 22nd that Sir John Bond, the group Chairman, bought 100,000 shares at 116p, taking his holding to 337,000. We looked back at recent history, and found another non exec, Luc Vandevelde, buying 32,500 shares at 120p on March 24th, taking his holding to 72,500 shares.

View on Vodafone : Positive                   Value of directors dealings signal: High/Strong

Eaga (EAGA, 127p)

saw two purchases ny non execs last week, namely Roger Ayland and Malcolm Simpson, who bought 50,000 and 8,000 shares respectively, at around 120p, taking their holdings in the energy efficiency company to 50,000 and 96,000 shares respectively.

View on Eaga : Positive                              Value of directors dealings signal : High/Strong

QinetiQ (QQ., 146p)

last week announced share purchases by non execs Nick Luff and David Lees. Luff bought 20,000 shares at 141p, taking his holding to 70,000 share, and David Lees bought 10,000 shares at just over 144p, taking his holding to 83,000 shares. Back on the 12th of March, the CEO Graham Love had bought 100,000 shares at 141p, pushing his shareholding to over 5 million shares.

Sir John Chisholm, the Executive Chairman, called the top on QinetiQ when he sold 1.5 million shares within 8p of the high, at 220p, on 27th August last year. 

View on QinetiQ: Positive                  Value of directors dealings signal: High/Strong

pacelogo The CEO of Pace (PIC, 177.5p), Neil Gaydon, last week exercised options on 850,000 shares at between 63.5p and 74.25p, then sold all 850,000 shares at 177p (May 13th, source London Stock Exchange).

Gaydon continues to hold 41,000 shares and have options over a further 2.3 million shares. We looked back to see if Gaydon had a track record in share transactions, and found some interesting disclosures.

Pace shares were trading at below 40p in June 2006, and ran to a high of 130p 12 months later.

Gaydon and his colleague Anthony Dixon, the Pace Company Secretary, exercised options and sold all their shares in July and August 2007, at prices between 108p and 115p.

Pace shares reached a low again of 35p in November 2008, and have rallied strongly to a high of 186p at the beginning of this month.

Gaydons recent Options Exercise and Sale of all the shares was accompanied again by Anthony Dixon, who sold 135,000 shares at 170p, and also by Chief Operating Officer David McKinney, who sold 250,000 shares at 141p (sales executed between 29th April to 12th May 2009)

We view at share sales following options exercise as follows:

Retention of all shares: Positive ( a net investment by the director)

Sale of sufficient shares to pay for tax and social security: Neutral (no net in- or di-vestment)

Sale of all shares: Negative ( a net disposal by the director)

Pace shares have been hugely volatile, and we  think these Directors Dealings are worth listening to.

View on Pace : Negative (Directors selling shares)

Strength of Signal: Strong (based on individuals track record)

On October 31st we noticed a significant jump in the ratio of companies in the FTSE 350 index exhibiting share purchases by directors.

Companies in the index which exhibited net Purchases by directors (cumulative gbp50k+ in the month) vs Sales had moved from evens to as high as 10:1.  (See October 31st post: Directors ARE buying shares- Buys outnumber Sells 10:1).

Since October 31st the FTSE 350 index is up 21.5%.

Companies featuring on the followthedirectors ‘STRONG’ signal list as at October 30 2008 have outperformed their relevant stock market indices by over 10% over the period.

Over the subsequent months, the ratio of directors buys versus sells has dropped as follows:

Month            ratio of Buys to Sells in FTSE 350 index

October:               10 : 1

November       2.75: 1

December           1.3: 1

January              1.15: 1

March                  1.0: 1

April                    0.56:1

I’m not too surprised by the falls in directors share purchases,  but the latest data point showing Sells outnumbering Buys by almost 2:1 sends a clear signal, and a bit of a shiver up the spine: Directors think shares are expensive.

If we analyse directors dealings by market segment, then we find that in the FTSE 100 stocks, sells in April outnumber buys by 12:8. yet in the FTSE Small Cap index, directors appear still to be buying, with buys outnumbering sells by 5:1. This ratio hasn’t changed since October, when the ratio was similar. It jumped to 7:1 in November.

The last time we saw Buys below Sells was for the month of June 2007, when the ratio dropped from evens in May to 0.8 in June. Wasn’t that the month the stock market peaked?

We all love to see a stock market recovering, but I personally am taking some money out, and looking for signals when directors start buying again.

‘Sell in May and Go Away’? Read John Mauldins thoughts on He analyses May to October share market performance in secular bear markets. Not a pretty picture.

See also The Pragmatic Capitalist: ‘Insider Buying non existent’ [good chart here].

Forbes suggest in ‘When Insiders Sell‘ that we shouldn’t worry too much about the spike in Insider selling, that it could be down to Directors being ‘too leveraged’. [hat tip to FT Alphaville]

For our previous views on the Market, please click on the ‘Market Musings’ tab to the left of this post, or here. This is where you will find the following posts:

April 2nd: Non execs make better investors- by far.

February 4th: Directors buying interest falls away in a sideways market.

December 16th: Directors buying waned in November

October 31st: Directors ARE buying shares- Buys outnumber Sells 10:1

Source: The excellent website ‘‘ is the source of information for the Directors Dealings Buy/Sell ratios given above.

See also Ockham Research : “Insiders are selling into the rally” (April 24th)

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From the last week of October to the first week of November the market rallyed by over 20%. Directors were actively buying, outnumbering sells by at least 5 to 1, a huge sentiment change given that the status quo for directors transactions is generally between 1 and 1 1/2 (buys) to 1 (sells). See October 30th ‘Directors ARE buying shares’

So what happened in November?

 Directors interest waned, and the ratio of buys to sells dropped from above 5 in October to around 2.75 in November (source : This is still a hugely positive number. But anecdotally, looking at recent directors transactions, the level of activity in December has fallen away, probably in line with general stock market activity given what my friends in the industry have been telling me.

Fear not though. In late 2002 early 2003 it took almost eight months for early directors buying signals (4:1 buys to sells in August 2002) to result in a convincing change in direction for the market.

We experienced ratios of 4:1 (August ’02), followed by 3:1, 1.5:1, 2:1, 5:1 (December ’02), 1.5:1, 2:1, 2:1 (March) before the market started to turn. (source: Digitallook).

What I suppose I am suggesting is that the 5:1 signal of October is the beginning of the end. You’ll probably see 2-4 significant market setbacks, accompanied by Directors buying activity, before the wider market builds up confidence.

You want me to put a date on it? Why not. Nobody else out there has a clue what’s going on.

Put your money to work in Equities between now and Easter, and be prepared (or don’t be surprised by) to take advantage of a further 20% fall in the market before then.

Directors Buying signalling market bottom?

I was surprised on Friday to see such a turnaround in directors sentiment ‘Directors ARE buying shares. Buys outnumber Sells 10 to 1’.

Data on Directors Dealings from Digitallook (site here) showed that over the month of October Directors Buys in the FT 350 companies outnumbered Directors Sells by almost 10:1.

This is a sharp change from data I ran on October 10th, which showed Buys and Sells at similar levels for the prior month.

Is this a turning point for the market? What is the precedent?

I used the Digitallook Screening Tools product to screen for Directors buys over GBP 50k, and sells over GBP 50k, and looked at the market turn in early 2003, when the FTSE rallied by 1/3rd in 12 months.

Through 2002 and 2003 Buys to Sells are in the ratio of between 1:1 and 2:1 for most of the month periods analysed.  In August and September 2002 this jumped to 4:1 and 3:1 respectively, then fell back to 1 1/2:1 and 2:1 for the following two months.

In December 2002 the Buy to Sell ratio popped up to 5:1, and the market didn’t look back for 30%, rallying 900 points to 4500 over the next twelve months. 

The ratio of Directors buys to sells dropped back in January, but was consistently in the 1.5:1 to 2:1 range for the subsequent six months. 

Is it time to buy the market now? All I can say is that investors today have substantially less confidence in the information available with which to make investment decisions. With this information vacuum, I believe that Directors Dealings play a more substantial role in telling us what is going on inside companies.

UK Engineers. 30 Directors buying shares.

The market killed the UK Engineering stocks on news of dismal results and orders in the truck and autos sector, and also justified concern that expansion at mines and oilfields will be delayed, trimmed back, or pulled completely.

So it is with interest then that we’ve seen, over the last two weeks, a substantial number of directors buying shares in GKN, IMI, Weir, John Wood, Bodycote, Laird and Senior.

I don’t know much about these companies, but I do know they are often the world leaders in their product areas, that historically they have been pretty good at generating cash, and have also attracted bid attention in the recent past (Bodycote).

And I also know that the 30 directors who have bought shares know a lot more than me about the valuation of their businesses.

For all comments by followthedirectors over the last week on the companies mentioned above see here.

Misys CEO Buys $350k stake in Allscripts.

If you are a Misys investor you should ask your broker about Allscripts (MDRX). Is Allscripts a cheaper way to buy a faster growing portion (Medical) of Misys’ business?

CEO of Misys, Mike Lawrie seems to think that Allscripts is the way to go. He has invested $350k in the group (our comment here). Misys now own more than 50% of the company which has 60m shares outstanding. Bloomberg show a short position of 6m shares, so this could prove to be rather interesting in both the near and long term.

Carnival dividend cut.

I wondered how long the bad news would take to come out of Carnival, the cruise business. They have suspended their dividend, saving $1bn + a year. 

In June and August the CEO and COO took $4.5m out of the company. CCL is down 23% since our comment of August 5th ‘Chilling out or downside risk’, underperforming the FTSE by 5%. I suspect we’ll see further negative comment on bookings over the next few months.


Disclosure: The author has positions in Misys, Weir, IMI, Senior, Laird, Bodycote, John Wood.

‘Bodycote (BOY, 118p) 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).

Four directors have bought shares in the last two months, and the CEO has exercised options over 148,000 shares (at a premium to todays price).

Between them and a PDMR they have bought around 132,000 shares in the market, and 148,000 shares via the options (CEO), investing over GBP 400k. Purchases and options exercises have been made between 114.88p and 206p over September and October 2008 (source: London Stock Exchange Market News website, type in BOY for all Bodycote news)


April 2007: Bodycote rejects fourth takeover bid from Sulzer (Times 20th April 2007) (stock reached high of 325p in March 2007)

October 2008: Bodycote announces completion of sale of Testing business for GBP 417m (October 17th 2008, company website)

Today: Bodycote shares now trading at 118p and have a market cap of GBP 380m.

Do you think Sulzer might come back for Bodycote? I don’t know Sulzers strategy or their financial position. Maybe you should ask somebody that does. But the directors clearly believe, as shown by their actions, that Bodycote shares are cheap.

View on Bodycote: Positive- Directors buying

Strength of Signal: Very STRONG. 5 out of 6 directors buying shares, significant $$ investment, company has a history of bid activity.

See also ’25 directors buy shares in UK engineering companies’ (October 28th

Laird plc (LRD, 150p) ‘provide technology for an increasingly connected world’ in the form of  Electronic Components and Antennae enabling wireless connectivity (see co website for the lowdown).

They last declared results at the end of July for the June half year, showing an operating cash flow of GBP 28m for the half year (or GBP 12.9m after tax and financing). For a company with a market cap of GBP 270m that looks pretty good (co slide presentation here).

On October 21st Laird issued an interim management statement, the key points of which we saw as ‘we continue to match our direct labour to changes in demand’ and ‘Laird remains extremely strong with low financial gearing and double-digit interest cover’ (full statement here).

In March the executive directors Hill, Silver and Rapp all exercised options and sold roughly the required amount to pay tax, at 494p per share.

In the last week four directors , including Peter Hill (CEO) and Jonathan Silver (CFO) above have been buying shares as follows (source London Stock Exchange):

22nd October :

Christopher Hum, non exec, buys 1512 shares at 161.675p per share taking his holding to 3000 shares.

Jonathan Silver, CFO, buys 20,000 shares at 167p per share, taking his holding to 210,000 shares

23rd October:

Peter Hill buys 18,000 shares at 156.36p, taking his holding to 200,000 shares, and finally

24th October:

AJ Reading, non exec, buys 3000 shares at 147.25p per share, taking his holding to 15,000 shares.

What do we think?

1. Four directors buying shares, mix of non exec and exec, shows confidence in the current half year performance of the group.

2. The size of purchases is however in three cases only 10-20%. I’d love to see a greater commitment.

3. Buying in times of huge uncertainty in the market is worth more to us as a signal than buying in stable times.

View on Laird: Positive- four directors buying

Significance of purchase: High/Strong– four directors buying in times of turmoil, four months into the half year.

See also ’25 directors buy shares in UK engineering companies’  (October 28th








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 (

Ad above for GBP 4.49 (

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.

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June 2022