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Take a look at this article on the Pragmatic Capitalist, which indicates that Insider sales in the US over the last two weeks outnumber buys by about 30:1: ‘Despite “greenshoots” insider sales spike’.

We observed significant share selling by directors in the UK in April: ‘Directors share sales outnumber buys- is the market expensive?’

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

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

Two non execs have decided enough’s enough, and ‘caught the falling knife’ by buying shares in Xstrata (XTA, 1310p).

Ian Strachan on October 2nd bought 5700 shares at GBP 17.19, investing GBP 97k and increasing his holding by over 60%. His colleague Claude Lamoureux on October 9th bought 4000 shares at GBP 13.78, investing GBP 55k. I don’t think he held any shares prior to this purchase.

If we look back to earlier this year, a number of executive directors including Trevor Reid (CFO), Santiago Zalmdumide (Executive Director), and Michael Davis (CEO) all exercised options and sold all their shares at between 3470p and 4342p (source: Company website, Digitallook, London Stock Exchange)_ Usual behaviour by directors is to sell a number of shares sufficient to pay the tax on the exercised share options, usually 40%. I’m not sure what the tax liability would be for these directors.

A sale of all the shares exercised indicates to me that they thought the shares were fully valued. How right they were. The share price of Xstrata fell from a high of 4420p in May to 1223p last week. 

Are the purchases by the two non execs of significance? Yes, they are significant in $$ terms, in terms of increase in shareholdings, and there are two directors acting.

Value of signal: Positive- Directors buying shares

Strength of signal: Medium

My name is Simon Winfield, and I have worked in leading investment banks in London and New York over the last 25 years, marketing investment ideas to the worlds top institutional investment managers and hedge funds.

Over the years I have met with senior management of hundreds of UK and European companies. I found managements’ body language and what companies didn’t say to investors to be far more valuable than what they did say, and I learnt to take the corporate spiel with a large pinch of salt.

Directors personal share dealings cut through the talk. I see them as a sign of what management really think of the opportunities and risks their company faces, as well as the current and potential company valuation.

In looking at directors dealings I ignore all the ‘incentive plan’ deals, where the company matches what you buy. Why wouldn’t you buy stock if you’re getting it half price? I ignore all the options exercising too, as this is usually seen by directors as pay which needs to be turned into cash.

Anything I write here is my personal opinion, and is not a recommendation to buy or sell shares, just my commentary on activity in the market.

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