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It wasn’t that long ago (end of October), when Allscripts were trading at around $5, that we spotted an announcement by Misys (MSY, 124p) that their CEO, Mike Lawrie, was buying shares in Allscripts (MDRX, $10.84), the medical software group in which Misys own a majority position.  Lawrie was followed shortly afterwards in his purchases by Glen Tullman, CEO of Allscripts.

We thought this purchase in shares of a subsidiary unusual, and suspected Lawrie of believing there to be better opportunities in Allscripts than in Misys.

The WSJ’s Inside Track picked up on our story on November 5th.

Since our note of October 30th (link here), Allscripts are up 96% in absolute terms, and up 120% vs the Dow Index.

Misys shares in dollar terms are pretty much unchanged over the period.

So Lawrie was right. Very right.

Why take Allscripts (MDRX) off the positive list? Because we think the share price now matches the markets expectations in the medium term:  Q3 profits were out last week, and despite ‘better than expected results’ the stock was down 28c on the day (MSN Money).

Extract from our note of October 30th 2008:

‘Mike Lawrie, CEO of Misys plc (MSY, 118p), and Chairman of Allscripts after Misys completed a purchase of the majority of the shares in the company, has bought 70,000 shares in Allscripts at $5.0921 (27th October- source London Stock Exchange– type MSY into Code box).

Lawrie already has a $1m shareholding in Misys (excluding his share options and performance plan shares). Does he now think Allscripts is the cheap (er) way to invest in the group?’

View on Allscripts: Neutral

For all our earlier comments on Allscripts click here.

Directors Buying signalling market bottom?

I was surprised on Friday to see such a turnaround in directors sentiment ‘Directors ARE buying shares. Buys outnumber Sells 10 to 1’.

Data on Directors Dealings from Digitallook (site here) showed that over the month of October Directors Buys in the FT 350 companies outnumbered Directors Sells by almost 10:1.

This is a sharp change from data I ran on October 10th, which showed Buys and Sells at similar levels for the prior month.

Is this a turning point for the market? What is the precedent?

I used the Digitallook Screening Tools product to screen for Directors buys over GBP 50k, and sells over GBP 50k, and looked at the market turn in early 2003, when the FTSE rallied by 1/3rd in 12 months.

Through 2002 and 2003 Buys to Sells are in the ratio of between 1:1 and 2:1 for most of the month periods analysed.  In August and September 2002 this jumped to 4:1 and 3:1 respectively, then fell back to 1 1/2:1 and 2:1 for the following two months.

In December 2002 the Buy to Sell ratio popped up to 5:1, and the market didn’t look back for 30%, rallying 900 points to 4500 over the next twelve months. 

The ratio of Directors buys to sells dropped back in January, but was consistently in the 1.5:1 to 2:1 range for the subsequent six months. 

Is it time to buy the market now? All I can say is that investors today have substantially less confidence in the information available with which to make investment decisions. With this information vacuum, I believe that Directors Dealings play a more substantial role in telling us what is going on inside companies.

UK Engineers. 30 Directors buying shares.

The market killed the UK Engineering stocks on news of dismal results and orders in the truck and autos sector, and also justified concern that expansion at mines and oilfields will be delayed, trimmed back, or pulled completely.

So it is with interest then that we’ve seen, over the last two weeks, a substantial number of directors buying shares in GKN, IMI, Weir, John Wood, Bodycote, Laird and Senior.

I don’t know much about these companies, but I do know they are often the world leaders in their product areas, that historically they have been pretty good at generating cash, and have also attracted bid attention in the recent past (Bodycote).

And I also know that the 30 directors who have bought shares know a lot more than me about the valuation of their businesses.

For all comments by followthedirectors over the last week on the companies mentioned above see here.

Misys CEO Buys $350k stake in Allscripts.

If you are a Misys investor you should ask your broker about Allscripts (MDRX). Is Allscripts a cheaper way to buy a faster growing portion (Medical) of Misys’ business?

CEO of Misys, Mike Lawrie seems to think that Allscripts is the way to go. He has invested $350k in the group (our comment here). Misys now own more than 50% of the company which has 60m shares outstanding. Bloomberg show a short position of 6m shares, so this could prove to be rather interesting in both the near and long term.

Carnival dividend cut.

I wondered how long the bad news would take to come out of Carnival, the cruise business. They have suspended their dividend, saving $1bn + a year. 

In June and August the CEO and COO took $4.5m out of the company. CCL is down 23% since our comment of August 5th ‘Chilling out or downside risk’, underperforming the FTSE by 5%. I suspect we’ll see further negative comment on bookings over the next few months.

 

Disclosure: The author has positions in Misys, Weir, IMI, Senior, Laird, Bodycote, John Wood.

Mike Lawrie, CEO of Misys plc (MSY, 118p), and Chairman of Allscripts after Misys completed a purchase of the majority of the shares in the company, has bought 70,000 shares in Allscripts at $5.0921 (27th October- source London Stock Exchange– type MSY into Code box).

Lawrie already has a $1m shareholding in Misys (excluding his share options and performance plan shares). Does he now think Allscripts is the cheap (er) way to invest in the group?

Misys have outperformed the market by 25% since Lawrie last bought shares in March 2008. In ‘mmmmmm Misys – ‘Turnaround Strategy’ working? ‘ followthedirectors drew attention to the Misys directors share purchases: 

Misys’(MSY. 137p) CEO, CFO and Chairman have increased their positions by between 14%, 50% and 60% respectively, buying shares at between 135p and 136p last Friday.
So why look at Misys?
1. Significant increase in positions (50-60%)
2. Three senior bods buying £70-£135k of shares each
3. Misys is one year into ‘Turnaround Strategy’, which should go some way to insulating them from the expected downturn in demand from banking customers.
So one for the watchlist, or for the long term investors.

Lawrie last paid 136p for Misys in March 2008. At the time MDRX were trading at $9 or 450p.

Misys are now trading at 118p, a fall of 14%, and MDRX at $5.50 or 342p, 24% lower (in the weaker pound).

Is that a huge variance? No. But I note, looking at Bloomberg, that the short position in MDRX amounts to 6.2m shares. Maybe that will all unwind when the acquisition of shares by Misys is settled.

Either way, I suspect that MDRX offers better growth (Medical underpenetrated by technology, higher recurring revenues, greater certainty of revenues than Banks), more certain cost savings (from merger of Misys and Allscripts Healthcare businesses), and ‘cheaper’ shares (as US holders sell out of what is now essentially a UK controlled company).

So if you are looking to buy Misys, investigate MDRX as a possible alternative. Lawrie has a good track record in his share purchases.

For all Misys comments on this site click here.

For the latest presentation (October 23) by the management of Misys Allscripts go to the Misys website.

View on Misys: Positive

Strength of signal indicated by directors share dealings: Remains STRONG

Disclosure: I have a position in Misys plc

WSJ November 5th ‘Allscripts executives snap up shares’

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