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Wow- ‘Liberty undermined by fundraising chatter’ (Independent)’ (LII, 365p)

Sounds very underhand to me.

But wait – only a month ago, Liberty International announced results and said they ‘intend to take further action to improve our liquidity and financial strength, including potential further asset sales and new capital raising’ (February 26th Liberty International Preliminary Results announcement).

Judging by the share price since then, the bears have been covering their shorts (Liberty up 15% from Feb 25th to last night, FTSE unchanged) , and we are reminded through market gossip that the capital raising is imminent.

The cynic in me says that Goldman are not involved, hence the move to a SELL with a target of 302p (Independent article). Where were you Goldman when the price was near 1000p in August last year, and senior management of Liberty were selling shares?

Since our note on August 31st (link below), Liberty International are down 62% in absolute terms, or down 44% relative to the FTSE 100 index.

The ‘directors selling’ signal was reinforced in January 2009, when we saw Harold Newton and William Black selling shares.

Hopefully all will be revealed in the next few weeks, maybe as soon as the Company’s EGM on April 1st (EGM notice here).

Look for opportunities to close the negative view on Liberty International below 300p.

Click here for all Followthedirectors comments on Liberty International:

January 11th, 522p: Liberty International shares continue to be vulnerable

August 31st, 984p: Liberty International- PDMR selling

February 20th, 958p:Liberty Internationals Gordon buys shares. So what.


Back in August last year, we noticed that despite excitement over a potential bid for Liberty International (LII, 522p), senior management in the form of a Harold Newton was selling shares. Unusual behaviour if you think there could soon be a bid on the table (see August 31st ‘Liberty International- PDMR selling’).

Since our caution, Liberty International have underperformed the Real Estate sector by around 20%, and the FTSE 100 by over 30%.

We believe Liberty International shares will continue to be vulnerable:

December 17th 2008 Harold Newton, a PDMR of Liberty, sold 19,000 shares at 495p taking his holding to 74,000 shares. Also

December 23rd and 24th William Black, also a PDMR of Liberty, sold 10,000 shares at between 482p and 488p, taking his holding to 100,000 shares.

View on Liberty International: Negative

Strength of Signal: Medium

For all comments on Liberty International (LII) click here.

Savills update:

There is no new news at Savills (SVS, 252p), save improving sentiment on UK rate cuts, which has resulted in great share performance (up 16% re FTSE 250 since Savills director Simon Hope sold shares on September 12th, and up 14% relative to the market since the group announced a profit warning on October 17th).

I do however expect a pre close statement from Savills next week, as the ‘Interim Management Statement’ [Profit warning] of October 17th was related to ‘recent weeks ….transaction volumes’, and two months in this market is a long time.

The other risk that arises comes from the ‘stepping down’ of the Finance Director Mark Dearsley, in what must be financially pretty stressful times for a business geared to transaction volumes. ‘His exit will mark the second departure from Savills this year and comes just weeks after the company issued a profit warning’ (Reuters November 26th).

So I stick to my guns on Savills, noting that four directors have sold shares between 295p and 359p this year, and that the risks remain on the downside.

For all previous comments on Savills on this website, including directors share sales and the profit warning, click here.

View on Savills – remains negative

Strength of Signal- Remains STRONG

In a week of severe stock market turbulence I come back from a week away to see swirling whirlpools stirred by uncertainty and panic.

So the question has to be: What do you and I do now?

I have three key memories that keep resurfacing which I want to share with you:

1. Yield. When I started my first job in the UK stockmarket in 1979, the key determinant of valuation was yield. Definitely not earnings. Nobody trusted earnings. Not prospective dividend yield either, but the historic dividend yield on stocks. Stock selection in the face of a recession needs to be based on the ability to survive. Choose companies that will continue to manufacture or sell their products because we need them in our day to day lives (I’m thonking food and healthcare), and value them using historic dividend yield.

Are these companies more likely to survive than your bank?  Yes, probably.  So maybe a dividend yield of over 7%, preferably nearer 10%, would be the levels to start buying.

2. Asset protection. I was in Argentina a couple of years ago, staying at a wonderful ‘loft’ apartment in Buenos Aires and talking about property values by the pool with a local who owned three apartments in the building. He said simply that investing your money in property is safer than in the banks. The banks can (and did) take it away. He didn’t own three properties because he was speculating on rising property values, he owned them because he believed them to be secure assets.

So that prompts me to think again about property as a secure asset, in that it will still be there next year, whereas your cash may not be.

What about Gold?  Yes, it is secure, but I get that niggling feeling that if I buy gold now I’ll be the last to the party.  Having said that, it may be worth owning only as an insurance policy for 5-10% of your assets.

3. Time to buy? These markets could easily fall another 30% from here, possibly in the next week! Where there is panic there is also opportunity, and we are getting closer to the opportunity levels. So do your research now and get your shopping list together. Then close your eyes, put in buying orders with strict limits, and above all don’t tell the mrs (or your partner)! Don’t use all your firepower, but start to drip money into the market bit by bit.

In October 1987 as the market plunged the experienced hands were saying use this as a buying opportunity, while the younger guys (including me) were panicking. Of course it was the wise brokers who had lived through the early 1970’s who were right.

Do we head for a depression? Maybe. We’re already in a (likely prolonged) recession. Nouriel Roubini suggests not a quick two quarters of negative GDP, but a prolonged 2 year recession (Roubini: The world is at severe risk of a global systemic financial meltdown and a severe global depression). Either way diversification of your assets is key.

Lastly, turn the TV off and don’t get sucked overboard into the maelstrom. The turning points for markets are when your cab driver is talking about them. Remember 2000 when cabbies told you which tech stocks to buy?  What are they saying now? (I’d love to hear- please write their comments in the box below).

Above all, follow your gut instinct. And Good luck!

Capital and Regional (CAL, 199p) get a great rap for their news of an ‘overhaul of its banking covenants and significantly reduced overall debt levels’ , see Telegraph article here.

It should come as no surprise then to find management confident and buying shares, having been extensive sellers in 2006 and 2007.

From October 2006 to May 2008, Kenneth Ford, Head of the shopping centre portfolio, sold 210,000 shares, realising about £1.2 million. That’s an average price of around £6 per share. He actually sold as high as £15.30p in April last year, not far off the stocks high of £16.95p in February 2007.

This week Ford bought 50,000 shares at 184.9p, taking his position to 606,000 shares.

Tom Chandos, Non exec Chairman bought 40,000 at the same price, doubling his holding to 80,000 shares, and Hugh Scott-Barratt, the CEO, bought 50,000 shares at 183.5p, a 1/3rd increase in his position to 200,000 shares.

So decent size purchases in £ terms, an average increase in holdings of more than 40%, and three directors buying. Yes I agree that Ford especially has a lot of earlier sales proceeds to commit, but I think these purchases herald the beginning of the end of the ‘fear’ period for Capital and Regional.

Signal strength: MEDIUM, with potential to upgrade pending further ££ purchases by directors.

savills-logo.gif

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.

Sources:

Savills H1 results presentation: http://ir.savills.com/savills/finnews/reports/interim07pres/interim07pres.pdf

Google Finance: http://finance.google.com/finance

Digitallook.com: http://www.digitallook.com/

For all articles on Savills published on followthedirectors click here.

Graeme Gordon, non exec Liberty International

Graeme Gordon, son of the founder of Liberty Intl (LII, 958p) Sir Donald Gordon,  and Non Executive Director, has invested £250k in Liberty International shares at 992p.

I looked back at historic trading, and Gordon nailed this one back in May 2006, when he bought 43,000 shares at 1001p. By the end of the year he was up 40% on that trade. His co directors started selling ap at the £14 level in late 2006 early 2007, and have sold down to 1120p in late 2007.

So yes, Gordons trade looks interesting from a timing point of view.

BUT – why bother? He’s already got £15m in Liberty shares in his own name, and must have claims on a significant portion of the ‘Gordon Family Interests’ £730m worth of Liberty Intl shares.

So even though this looks interesting, I’m going to discount the value of this signal due the the tiny increase in share ownership by Gordon. Now if he invested £5m, that would be a different matter…..

Richard Peskin clearly believes that the Real Estate sector in the UK remains good value. On the sixth of February he committed a further £689,000 to buying 150,000 shares in his baby Great Portland Estates (GPOR, 456p), at 460p.

As Questor says (24/1/08), this isn’t a ‘value’ stock, but one with low exposure to financial tenants, and above sector portfolio performance. That, and Peskins huge experience in the sector mean that for me, Great Portland remains on the buy list.

See previous posts on GPOR of November 19 2007 and also November 25th 2007.

Have a look at this article in todays FT. Sometimes director buying activity signals a market turn. I don’t have the data to prove it, but it is one of many indicators that could support a change in direction for stock markets.

‘Senior US company executives bought more shares than they sold last month for the first time in 13 years’……………. see FT article

I look also at directors buying activity by sector. I made what was a controversial call at the time, on the back of directors buying activity in the Real Estate sector (see entry of November 25th). Since then the sector is up 10%, and the FT All Share index down 2%, so a relative outperformance of 12%.

Since January 17th, when I highlighted directors buying outpacing selling, we have seen the Travel and Leisure sector outperforming the All Share by 7%, and the Construction and Materials sector by 2%. Early days I feel for these two.

When I looked at Director share activity in the Real Estate back in early January, I found that buys outnumbered sells by 4:1 (source digitallook. using net director activity over 1 month. cut off £50k).

I find on my return from holiday that this has now accelerated to 10 buys vs 0 sells. Admittedly these are smaller caps such as Warner (WNER), Big Yellow (BYG), and Hansteen (HSTN). However I strongly believe that this behaviour reinforces our earlier call to buy the sector (November 25th- Real Estate Sector- directors are buying).

I’ve also been looking recently at reversals of director dealing activity by sector. To do this I look at the Directors net dealings over one year, and compare that data with the net activity over one month.

This throws up two sectors of interest, Travel, and Construction and Materials. In the Construction and Materials sector, stocks where we have seen significant director sales in the last twelve months more recently countered by buying activity over the last month, include Carillion (CLLN), Keller (KLR), and Rok (ROK).

In the Travel sector stocks that show a reversal from net selling to net buying are Clapham House, Partygaming, Restaurant Group and Prezzo.

Clearly both these sectors are highly exposed to Interest rates and Consumer sentiment. Opportunities present themselves in the stock market when investor sentiment is one sided. Any change in sentiment results in significant share price changes, as we are starting to see in the Real Estate Sector.

(Real estate sector stocks showing director buying activity over the last month are Sovereign SVN, Warner WNER, Rugby RES, Big Yellow BYG, Naya Bharat NBPC, DTZ DTZ, Hansteen HSTN, Quinlam QED, Real Estate Opportunities REO, Dolphin Capital DCI)

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