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Back in May this year four executive members of the board (White, Farley, Kiloran and Bryant) of Persimmon (PSN, 377p) sold shares at 567p. Within eight weeks Persimmon shares were trading at 220p.
On September 30th we saw the first purchase of shares at Persimmon by the senior independent non executive director David Thompson. Mr Thompson invested almost GBP 80,000 for various members of his family by buying 20,000 shares at 398p.
Thompson increased his (and his familys’) holding in Persimmon by 50%, taking their holding to 60,000 shares.
These purchases don’t score highly on my ‘significance’ rating, because only one director is buying shares. I thought it worth recording though due to the size (GBP 80k) and the increase in shareholding (50%).
View of directors dealings: Positive- director is buying shares
Significance of the transaction: Low / Weak as only one director buying shares
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A summary of my thoughts from last week (click on stock name to get the article/post) :
Axis Shield (ASD) – Signal strength MEDIUM – Positive- Ex Chairman of Axis (before merger with Shield) Erik Hornnaess, is seen to be payer pretty high levels for shares in his alma mater Axis Shield. The stock is up 40% relative to the market so far this year. This is postive for two reasons: a) as a non exec he knows what’s going on within the group. b) as an ex chairman he knows this business inside out. Also- if you look back you’ll see he is supported by consistent buying from directors earlier in the year.
Reckitt Benckiser (RB.)- no signal- interesting activity nonetheless, with EVP de Groot buying aggressively, and CEO Bart Becht selling shares he exercised earlier.
RBS (RBS)- Weak signal – Negative – The whole board of RBS subscribed for shares at 200p in the June offering. Now we see two directors selling. Either they need the cash, or they think there is downside risk in the shares. Or both.
Rathbones (RAT)- Medium signal- Negative – Two directors of Rathbone have taken advantage of a 50% jump in the share price to top slice their positions in the group. It is interesting to see the same thing happening at another private client broker/adviser Hargreaves Lansdown, where three directors are selling.
Tate and Lyle (TATE) – Strong signal- Positive- Six directors bought shares last week after the shares fell 10% on a court ruling. Since October last year seven directors out of a board of 10 have been buying shares, a significant proportion.
ITV (ITV) – Weak signal- Positive- CFO, Director of Television, and Deputy Chairman have all bought shares in the last week at around 1/3rd of last years share price. We may start to see more news on costcutting at the group, although I need to see more directors share buying before being convinced. In the meantime ITV goes on the watchlist.
AIG (AIG) – no signal- my thoughts on Hank Greenberg reportedly selling shares in AIG whilst lending his support to the ‘rescue’.
Disclosure: I have a position in Axis Shield.
This must be a classic case of saying one thing and doing another. Hank Greenberg reportedly raised $129m by selling down his stake in AIG (AIG) whilst extolling the virtues of the company.
My view: ‘Actions speak louder than words’, the basis and reason for my analysis of directors dealings.
You must read FT Alphavilles article on this share sale. Click here.
Up almost 50% from Julys low (730p), Rathbone (RAT, 1060p) (chart) are seeing a couple of their Executive Directors take advantage of a strong share price to reduce their exposure.
Richard Smeeton has sold (on 19/9/08) 12,000 shares at 1035p taking his holding to 115,673 shares, and Andrew Morris has sold (23/9/08) 11,791 shares at 1063p, taking his holding down to 41,268 shares.
Another two directors (Ian Buckley and Richard Loader) have also sold, but in much smaller size.
These trades echo selling at Hargreaves Lansdowne (see my posts here), also up 50% from the lows, where three directors continue to sell.
Four directors selling, but not a significant portion of their holding, warrants a MEDIUM strength signal. The risks lie on the downside.
Addendum October 14th:
Further sales have been reported as follows:
Clive Hexton, on the board of Rathbone Investment Management, has sold 5200 shares at 983p taking his holding to 8700 shares (October 6th), and
Hugh Adlington, at Rathbones Investment Management London, has sold 10,000 shares at 987p, taking his holding to 44,000 shares (October 3rd).
Directors of Roc Oil (ROC, 58.5p) were consistently selling shares in late 2007 at prices between 128p and 150p (Clement, Dobinson, Jolliffe, Jansma all sold between October and December 2007 at between 128p and 150p).
I noticed a change of behaviour last week, as two executive directors bought shares.
Dennis Paterson, President of Roc Oil China, bought 87,000 shares at 43p on August 26th, taking his holding to 87,000 shares plus options on a further 470,000.
Bruce Clement, Acting CEO, bought 40,000 shares at 113 Aussie cents to 114 Aussie cents on August 25th and 29th. This purchase took his position to 120,000 shares and options on a further 680,000.
In $ terms these purchases are not significant, but in terms of the % increase in holding, and the behavioral change from selling to buying, I believe they are significant.
The value of this directors share purchase as a signal for investors will be graded MEDIUM, subject to an upgrade if we see further purchases.
Roc Oil is listed on AIM in London, and on the ASX in Sydney.
A mail from John Mauldin has just hit my inbox. He picks up on a comment by Soc Gen showing that analysts are always behind the curve when it comes to earnings forecasts (did you know this?). He goes on to conclude that the likely fall in company earnings this recession is nowhere near being discounted by the share market (see http://www.frontlinethoughts.com/index.asp article ‘Asleep at the wheel’).
I’ve borrowed from the newsletter an interesting slide summarising a recent Duke University CFO survey which strengthens my argument for watching directors behaviour, in preference to listening to what they say. Notably that
‘..CFOs are around 57% optimistic about the economy…., but are 68% optimistic about the outlook for their own firms!’
followthedirectors... a study of directors share dealings 