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A summary of my thoughts from last week (click on stock name to get the article/post) :

Axis Shield (ASD) – Signal strength MEDIUM –  Positive- Ex Chairman of Axis (before merger with Shield) Erik Hornnaess, is seen to be payer pretty high levels for shares in his alma mater Axis Shield. The stock is up 40% relative to the market so far this year. This is postive for two reasons: a) as a non exec he knows what’s going on within the group. b) as an ex chairman he knows this business inside out. Also- if you look back you’ll see he is supported by consistent buying from directors earlier in the year.

Reckitt Benckiser (RB.)- no signal- interesting activity nonetheless, with EVP de Groot buying aggressively, and CEO Bart Becht selling shares he exercised earlier.

RBS (RBS)- Weak signal – Negative – The whole board of RBS subscribed for shares at 200p in the June offering. Now we see two directors selling. Either they need the cash, or they think there is downside risk in the shares. Or both.

Rathbones (RAT)- Medium signal- Negative – Two directors of Rathbone have taken advantage of a 50% jump in the share price to top slice their positions in the group. It is interesting to see the same thing happening at another private client broker/adviser Hargreaves Lansdown, where three directors are selling.

Tate and Lyle (TATE) – Strong signal- Positive- Six directors bought shares last week after the shares fell 10% on a court ruling. Since October last year seven directors out of a board of 10 have been buying shares, a significant proportion.

ITV (ITV) – Weak signal- Positive- CFO, Director of Television, and Deputy Chairman have all bought shares in the last week at around 1/3rd of last years share price. We may start to see more news on costcutting at the group, although I need to see more directors share buying before being convinced. In the meantime ITV goes on the watchlist. 

AIG (AIG) – no signal- my thoughts on Hank Greenberg reportedly selling shares in AIG whilst lending his support to the ‘rescue’.

Disclosure: I have a position in Axis Shield.

Over the last couple of weeks w’ve seen two directors selling shares in RBS (RBS, 214p):

Non exec Lawrence Fish sold 140,000 shares at 223.36p on September 22nd. This takes him to 182,309 shares. He had bought 119,000 shares in the June capital raising at 200p per share.

General Counsel and Group Secretary Miller McLean sold 60,000 shares at 248p on September 10th. He bought 526,000 shares in the June offer.

McLean owns over 1.3m shares in RBS, and Fish was recently apponted a non exec in May this year, having previously held an Executive position.

Are these share sales significant? Not yet.  

Find other posts on RBS here.

I haven’t seen the full details yet of who bought what when.

But the Times points to a significant purchase by HBOS (HBOS, 474p) directors and staff, who ‘spent almost £6 million bumping up their shareholdings in the FTSE 100 mortgage bank the day after malicious rumours’.

Let’s take a look back to November last year, when the banks were in freefall over market rumours as to who held the toxic waste. RBS directors, by buying in significant size, and in concert, sent a very strong message to the market.

Over the next three weeks, RBS was up 21% absolute, or 18% relative to the FTSE. Can this happen again? Absolutely. But I don’t think it will take three weeks this time

See my note of December 6th: RBS directors outperform FTSE by 18%.

Postscript with my change of view following further information, see post of March 26th on HBOS ‘Read the fine print’.

I want to wish you ‘good investing’ in a period of huge uncertainty. I suppose (is ‘hope’ a more appropriate word) the brave will be there to buy when everybody is panicking, which is why I’ve allowed myself to have a list of buys.

When I look at directors dealings I’m looking for a change of pattern or direction, an intensity of director interest indicated by volume and speed, and a sentiment change within a sector.

Stocks that satisfy one or more of these criteria are

  • Wolfson (WLF)
  • Aegis (AGS)
  • Findel (FDL)
  • Enodis (ENO)
  • Segro (SGRO)
  • Hammerson (HMSO)
  • Great Portland (GPOR)
  • Yell (YELL)
  • Michael Page (MPI)

Look in the archives or via the tag list for my reasoning on these stocks.

Real estate stocks are overweighted here, which I suppose shows a tendency to ‘value’, by me and company directors. If I look at the real estate sector overall though, I find that over the last month director buys outnumber sells by about 4:1 (source www.digitallook.com). Interestingly the bank directors seem to have gone a little quiet recently, after a flurry in early November (see RBS) !!

You’ll also notice a preponderence to midcap or ftse250 stocks in this list. This is not intended, but a result of the criteria. I don’t look at stocks smaller than the ftse 250.

Today FT.com reports on RBS: ‘ Sir Fred Goodwin, chief executive, said the bank had been “comparatively unaffected” by turbulence in world markets and the write-down because of credit market moves would be a net £950m in the second half. This is below the £1bn to £2bn range of expectations.’

RBS

On November 12th followthedirectors reported: ‘Strong message from RBS’. ‘Five non exec directors of Royal Bank of Scotland (RBS) last week bought shares at between 403p and 423p. They increased their shareholdings by a significant amount, by between 25 and 150%, and put in between £40k and £495k of their own money.

I went on to comment that ‘For a bank which is supposedly sitting on possible losses of several billion pounds this is certainly interesting behaviour. It also signals to me that the market has oversold RBS in anticipation of the disclosure of these losses.’

So, friends, did the market listen to the strong message that the RBS directors were sending? Mostly, yes.

The FTSE over that period is up from 6300 to 6500, a rise of 3%

Since my report on November 12th in the am, RBS are up from 402p open, or 406p where I bought them that morning, to 493p now, a rise of 21%.

And while I’m blowing my trumpet, in the same post I suggested a switch (or short position) out of Standard Chartered and HSBC into Barclays and RBS.

If you (or I for that matter) had done this, then your long positions would be up on average 19% (RBS 21%, Barc 17%) and your short positions up on average 8% (Stan 15%, HSBC 1%), a return of 11%. Go back to my post of November 12th for director dealing driven signals that prompted this suggested trade.

Five non exec directors of Royal Bank of Scotland (RBS) last week bought shares at between 403p and 423p. They increased their shareholdings by a significant amount, by between 25 and 150%, and put in between £40k and £495k of their own money.

For a bank which is supposedly sitting on possible losses of several billion pounds this is certainly interesting behaviour. It also signals to me that the market has oversold RBS in anticipation of the disclosure of these losses.

The top for RBS was signalled in March by Finance Director Whittaker, who sold almost £500k of shares in his employer at prices almost 75% higher than today.  I believe last Thursday and Fridays purchases signal a buying opportunity.

If I look at the sector overall, I find the biggest director buying in Barclays (£600k) and RBS (£2.2m) over the last 30 days. Selling has been in HSBC (Non exec Hughes Hallett almost £1m) and Standard Chartered (Chairman Davies £1.5m) both in mid October. Bothy these stocks rank amongst the best performers of the month, down only 11% and 2% over the last thirty days, while RBS and Barclays rank amongst the worst performers, bar Northern Rock, down 28% and 27% over the same period.

If I were a betting man, I’d switch out of STAN and HSBC into BARC and RBS ahead of write down disclosures below what the market now anticipates. And I’d also be looking for more news about something potentially much more serious, contagion of a US and European slowdown to Asian economies.

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