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Galiform (GFRM, 19p), the UK kitchen builder and joinery company, announced last week (26th March, that the CEO Matthew Ingle and the CFO Mark Robson had substantially increased their holdings.

Ingle bought 870,000 shares at 15p and 17p, taking his holding to 2.7m shares, and Robson bought 403,000 shares at 17p, taking his holding to 930,000 shares.

Good news?

If you look at historic cases of two non execs and no non execs transacting, the average relative underperformance since the transaction is -8%. If a non exec joins them, then the historic performance jumps to + 16% (followthedirectors analysis of transactions of 350 directors over last 14 months-unpublished).

I got this one completely wrong in April last year, when Robson bought 132,000 shares at 77p. The stock is down 73% since then, a relative underperformance of 33% (see ‘Housebuilders at a standstill, but galiform directors buying’).

It may simply be that Galiform directors, and the share price, are playing catchup with Barratts. We saw Barratt (BDEV, 126p) directors buying shares in November and December. Barratt shares are up 69% absolute or 60% relative since our comment on January 15th: ‘Barratt- look for buying opportunities.’

I see the Galiform directors purchases as reinforcing a positive view for the housebuilding sector overall.

View on Galiform: Positive.

Reiterate Positive view on Barratt Developments.

Signal strength: Weak (would upgrade if we see a non exec buying shares)

I’m going to start to look more closely at using recent director dealing activity as a signal ahead of news. (I’m unsure about the reliability of what is essentially a long term signal being used as a forecast for short term movements in share prices. We’ll see how it goes shall we.)

All stocks listed below have news out next week.

All these stocks have seen director dealing activity which I have commented on. Click on the stock ticker to take you to the comment(s).

My favourite pick for positive feedback from an analysts visit is MISYS.

ENO neutral bid situation. Interims 13/5

ARM warm already had +ve Q1 on 29/4. AGM 13/5

CPG warm already had +ve trading update 27/3. Interims 14/5

MSY POSITIVE CEO, CFO, COO increased positions by 14%/50%/60% in late March. Analyst visit 14/5

AMEC POSITIVE CEO increased position by 50% spending £500k in April. AGM 14/5

CKSN POSITIVE CFO and CEO increased positions by 90% and 45% mid March. Trading Statement 15/5

III warm CEO Rea bought £500k on March 4th. Prelims 15/5

GFRM neutral already had trading update 1/5. AGM 16/5

All news dates are taken from Google Finance. They have not been verified with the companies themselves.

I want to recap here posts that I wrote last month, with the absolute and relative performance of shares to today. To see the original posts I am referring to, look for the title to the left of here, or type the company name into the ‘Search’ box.

April 3rd Diageo DGE 1055p NEGATIVE CALL -1.6% absolute, -7% relative

Negative call based on the news that CEO Walsh had sold £1m of shares, and upon reviewing his historical sales, found him to have excellent market timing.

April 7th Cairn Energy 2915p NEGATIVE CALL +5.4% absolute, +1% relative

Negative call on news that Non Exec Chairman had sold half his holding in Cairn

April 25th AMEC AMEC 752p POSITIVE CALL +9% absolute, +7% relative

Positive call on news that CEO Brikho had increased his position by 50%. buying £483k of shares

April 25th EAGA EAGA 135p POSITIVE CALL -13% absolute, -19% relative

Positive call based on directors buying in a vacuum of information or market knowledge on Eaga.

April 25th Galiform GFRM 71p POSITIVE CALL +18% absolute, +12% relative

Positive call based on intriguing market timing, namely CFO buying shares for the first time since joining the board in 2005, in an environment of negative news from the housebuilders.

April 30th Connaught CNT Eaga EAGA -4.5% relative

Switch suggestion (long term ‘2-3 sets of results’) from CNT into EAGA based on director selling in former, and buying in latter, as well as significant valuation differences

I’m intrigued.

Galiform (GFRM, 71p) own Howdens Joinery, which supplies kitchens and joinery products to the building trade.

In a week of turmoil in the UK housebuilding industry prompted by Persimmon warning they would stop building new homes, I find that the CFO of Galiform, Mark Robson, makes his first purchase of shares since he joined the board in 2005.

Robson on April 15th bought 132,000 shares at 77 1/2 p, investing £102,000.

As a result Galiform goes on the watch list.

Addendum May 1st : I’m no longer intrigued. Stock is up 7% today on results better than the market anticipated. See reuters comment here.

A Howdens Joinery kitchen

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June 2022