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Barratt (BDEV, 144p) are up 90% absolute and 60% relative since January 15th when a price of 75p catalysed my positive view: ‘Barratt- look for buying opportunities’.

We’ve just seen a few minor directors sales at Berkeley Group Holdings, with Pidgeley, Perrins and Carey selling 600,000 shares between them at 960p, reducing their holdings to a combined 6.48m shares (April 29th- source London Stock Exchange).

So these share sales are insignificant in % terms, but I consider them an indicator of a likeley ‘breather’ in the Housebuilding  sectors performance.

So I’m happy to take my profits on Barratt Developments.

View on Barratt Developments: Neutral.

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historic performance jumps to + 16% (followthedirectors analysis of transactions of 350 directors over last 14 months-unpublished).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)

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

It seems to me as if Savills (SVS, 266p) are almost a second derivative on the UK housing market. Not only are there huge swings in sentiment on housing, but these seem to play out with greater amplitude in the Savills share price.

Of course Lehmans demise will impact the London housing market. Not only by Lehman redundancies, but also having all those other banks not paying bonuses for a couple of years: ‘you’re lucky to have a job, son’.

Savills directors dealings seem to be a pretty good indicator (or maybe influence) on the share price.

Simon Hope on Friday sold 62283 shares at 295p, taking his holding to 87,547 shares.

I’ve commented on him before (links to comments in blue), so let’s look at how the share price coincides with Directors activity in the sector, and my comments:

November 8th 2007: Hope sold GBP 350k (net of options exercise) of shares at 353p. I said Housebuilders- too early to buy.

March 10th 2008. I highlighted the ‘risk’ inherent in Savills shares ahead of results, using Hopes share sale in November as an indicator, by saying Savills up 50% this year, results Wednesday. Watch out.

August 4th 2008. We saw directors (Sir John Ritblat and CEO Izett) buying at Colliers Re, also in the agency/property management sector. As a result I said Real Estate agents – time to buy?

Now let’s look at the value of using these directors dealings as a signal for investors. I list here the dates of my comments, and the share price performance between them:

November 8th to March 10th SVS down 5%

March 10th to August 4th, SVS down 35% absolute, or down 13% relative to the FTSE 250.

August 4th to September 12th, SVS up 33% absolute, or 32% relative, but Hope didn’t announce his sale until yesterday, so

August 4th to September 15th, SVS up 23% absolute, or up 25% relative.

So what is the downside risk in Savills today then, and can this string of successful calls be repeated?

Between August 4th and today, Savills are up roughly 30% relative to Colliers Re. If you look at a longer term chart of these two stocks, they more or less perform in line with each other. Colliers is a little slower to move due to its illiquidity. So that’s what I think the scale of the downside risk is in Savills.

Also note that Savills have a pretty heavy cost base with 17,000 employees, versus Lehmans 28,000.

Value of Directors Dealings as a signal to investors: STRONG

Link to all my previous comments on Savills here.

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


I was just looking at the forthcoming news, and see that Savills (SVS, 344p ) have their results this week (Wednesday March 12th).

A pretty non committal trading statement in January, and decent performance by the Real Estate sector (Savills classified by FTA as Real Estate) mean that this stock has been a great performer. Savills are up around 50% from their January lows, and have also outperformed Taylor Wimpey by 50% since the turn of the year.

I warned that it was too early to buy the housebuilders when I saw a director at Savills selling down his position in November at 353p. But I really now believe that any news this week from Savills is likely to be negative for the share price.

No matter what they say about global reach, 80% of operating profits come from the UK. And did you know that they have more than 17,000 employees ? Yes, a large chunk of costs will be commission (1/3rd of total staff costs), but 17,000 people is a heavy cost base to manage when things are turning down.

Another thing. Savills financial results didn’t seem to have any gearing to the upside when revenues were rising (revenues up  34%, operating profits only up 10% at June 2007 interim results) which means costs (staff costs up 35%) have been rising as fast as revenues. So watch what happens when revenues start falling.


Savills H1 results presentation:

Google Finance:

For all articles on Savills published on followthedirectors click here.

In mid October we saw three directors (two executive, one non exec) buying significant positions in Barratt Developments (BDEV) . Was this in anticipation of Gordon Browns aggressive house building targets for the UK in order to satisfy housing demand?

Conversely Simon Hope, director of Savills (SVS) , last week exercised some share options and sold a significant chunk of stock (taking a net £350k off the table), even after a 50% fall in the share price since April.  I would suggest this to be a negative sign for the real estate sector in the UK, and an indication that volumes have significant downside risk over the next six to twelve months.

The best indicator of upcoming risk in the sector was the decision by Jon Hunt, the founder of Foxtons, to sell out in May pocketing £370m.

For a buying signal, we need to see directors from across the sector putting money to work. This could be a while coming.

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June 2022