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On October 14th I posted the following article ‘Are directors buying shares?’, prompted by your questions.
‘As at October 10th 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 run the Digitallook screen again, and find that over the past month, to today, companies in the FTSE 350 which exhibit cumulative director share dealing activity greater than GBP 50k are as follows:
6 companies show net selling, and 59 companies show net buying.
Over the past week, the screen shows 3 companies showing net selling, and 18 companies showing net buying.
This indicates that Buyers outnumber Sellers by between 6:1 and 10:1.
A very powerful signal that company directors think shares are cheap.
I guess valuation has something to do with it. The FTSE 100 is roughly 10% lower, and the FTSE 250 very roughly 20% lower over the one month period (compared to the one month to October 10th). Anecdotally most of the buying activity has occurred in FTSE 250 stocks.
For followthedirectors comments on companies exhibiting director buying activity click here (This is not a comprehensive list, but companies that we believe warrant comment).
For other general market commentary see Market Musings here.
For the excellent Digitallook screening tool go to Digitallook.com
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!’
There’s a plethora of information about directors share dealings in Cairn Energy ( CNE, 2915p) last week.
If you filter out the sales by executive directors of shares released under the Long Term Incentive Plan, and eliminate shareholdings sold and bought back before CGT changes, you are left with four notable changes in holdings:
1. CEO Sir Bill Gammall has sold 50,000 shares taking his holding to 377,000 shares.
2. Exploration Director Dr Mike Watts sold 40,000 shares taking his holding to 160,000 shares.
In my mind both of the above sales are interesting but not hugely significant.
Of greater interest are the sales by Non Executive Directors as follows:
3. Non executive Chairman Norman Murray halves his holding by selling 40,000 shares at £28.61, releasing £1.1m, and
4. Non executive Director Todd Hart reduces his holding by more than a third, selling 10,000 shares to leave him with 18,000.
I believe these sales to be significant, both in value terms, and as a proportion of the directors’ position (holding) in Cairn prior to the sales.
Source: http://www.Digitallook.com