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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

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’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).

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.

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.

September 12th: Simon Hope, Savills (SVS, 205p) Executive Director with responsibility for Capital Markets, sells 62283 Savills shares at 295p, taking his holding to 87,547 shares and raising GBP 183,797.

 

 

September 16th: followthedirectors comments: Savills – further to fall – Directors sell’

October 17th : ‘Savills Says Earnings Will Miss Analysts’ Estimates’ (Bloomberg article) : ‘this year’s pretax profit will miss analysts’ estimates because of the slump in transactions caused by the credit-market turmoil.’

I know that in these markets five weeks is a lifetime, but do you not think the board of Savills have had regular discussions about the risk to their profits and earnings in their weekly board meetings?

If you had followed Savills directors dealings and the followthedirectors commentary, then this news would be no surprise to you.

Find below the performance you might have achieved if you had followed our commentary (I list here the dates of my comments, and the share price performance between them): 

November 8th (followthedirectors say ‘don’t buy’). Performance to March 10th SVS down 5%

March 10th (‘results wednesday, watch out’) Performance to August 4th, SVS down 35% absolute, or down 13% relative to the FTSE 250.

August 4th (‘time to buy?‘) to September 12th, SVS up 33% absolute, or 32% relative, but Hope didn’t announce his sale until yesterday, so use August 4th to September 15th, SVS up 23% absolute, or up 25% relative.

September 16th (‘further to fall’) to today October 17th, SVS down 23%, but up 5% relative to the FTSE 250.

I would suggest that the risk in Savills remains distinctly on the downside.

For all comments on Savills click here or type Savills into the search box on the left.

Genus plc (GNS, 680p) ‘creates advances to animal breeding through biotechnology and sells added value products for livestock farming and food producers. Its non-genetically modified organism technology is applicable across all livestock species but is only commercialised by Genus in the bovine and porcine farming sectors’.

Genus has been the subject of ‘bid talk’ with rumours of a bid as high as 1300p per share (Scotsman article).

So what do the directors of Genus think? The answer is that five out of the six directors have bought shares since February, at prices in a surprisingly narrow range of between 680p and 720p:

CEO Wood has bought 20,000 shares at 700p taking his holding to 20,200 shares (and 342,000 shares of conditional share awards as part of the Company Performance Share Plan).

Chairman Hawkins has bought 4100 shares at 716p initiating a position.

Non exec Worby bought 10,000 shares at 720p initiating a position.

Non exec Turner has bought 15,000 shares at 716p initiating a position, and lastly

Non exec Professor Furr bought 3000 shares yesterday at 680p initiating a position.

These transactions qualify for a STRONG signal:

  1. Five out of six directors buying shares
  2. Average investment above GBP 70k
  3. Significant increase in holding (four out of the five purchases are to initiate holdings)
  4. The words ‘bid rumour’ have arisen in the last six months.

The words smoke and fire come to mind.

View on Genus plc: Positive- directors buying

Signal Strength: STRONG

On September 26th in ‘ITV directors dip their toes in the water- add to watchlist’ I noted purchases by three directors/senior managers at ITV (ITV, 39.5p) . I wanted to see further purchases before I bought the shares.

Over the last fortnight two non execs have also bought shares, in limited size, taking the number of directors buying shares to five.

Heather Killen, non exec, on October 1st bought 22,000 shares at 43p, initiating a position, and on October 9th Agnes Touraine, also a non exec, bought 100,000 shares at 37.5p.

Although these are relatively small purchases in $$ terms, it should be noted that all the five directors who have purchased shares (Griffiths- CFO, Fincham- Director of Television, Russell- Deputy Chairman, Killen- non exec, and Touraine – non exec) have initiated positions in ITV in the last month.

As a result of this, and the number of directors buying shares, the recent transactions act as a STRONG signal to investors.

View on ITV: POSITIVE- Directors buying shares

Strength of Signal: STRONG

Link to all comments on ITV.

[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.

On April 25th we saw Samir Brikho, CEO of Amec (AMEC, 525p), increasing his holding by 50% and investing close to GBP 500k Amec– a difference of opinion CEO buys, CFO sells.’ 

 

On Friday October 10th Brikho bought a further 50,000 shares at 497p, investing GBP 250k, taking his holding to 232,000 shares.

Other directors have also been active:

October 7th Non executive Tim Faithfull buys 5000 shares at 533p, doubling his holding to 10,000 shares, and

October 8th, Jock Green-Armytage, Non executive Chairman, increases his holding by 50% by buying 5000 shares at 509p.

Also in September Ian McHoul, the new CFO, bought 9000 shares at 746p to take his holding to 60,000 shares.

In the three months after Brikhos April 25th purchases, Amec outperformed the FTSE 100 by 30%. They have now given up all that outperformance against the index, and with the share price near 500p represent another opportunity.

View of Directors dealings: Positive signal with three directors buying in the last week.

Strength of signal: Remains STRONG

For all Amec comments click here.

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