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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

September 12th: Simon Hope, Savills (SVS, 205p) Executive Director with responsibility for Capital Markets, sells 62283 Savills shares at 295p, taking his holding to 87,547 shares and raising GBP 183,797.

 

 

September 16th: followthedirectors comments: Savills – further to fall – Directors sell’

October 17th : ‘Savills Says Earnings Will Miss Analysts’ Estimates’ (Bloomberg article) : ‘this year’s pretax profit will miss analysts’ estimates because of the slump in transactions caused by the credit-market turmoil.’

I know that in these markets five weeks is a lifetime, but do you not think the board of Savills have had regular discussions about the risk to their profits and earnings in their weekly board meetings?

If you had followed Savills directors dealings and the followthedirectors commentary, then this news would be no surprise to you.

Find below the performance you might have achieved if you had followed our commentary (I list here the dates of my comments, and the share price performance between them): 

November 8th (followthedirectors say ‘don’t buy’). Performance to March 10th SVS down 5%

March 10th (‘results wednesday, watch out’) Performance to August 4th, SVS down 35% absolute, or down 13% relative to the FTSE 250.

August 4th (‘time to buy?‘) to September 12th, SVS up 33% absolute, or 32% relative, but Hope didn’t announce his sale until yesterday, so use August 4th to September 15th, SVS up 23% absolute, or up 25% relative.

September 16th (‘further to fall’) to today October 17th, SVS down 23%, but up 5% relative to the FTSE 250.

I would suggest that the risk in Savills remains distinctly on the downside.

For all comments on Savills click here or type Savills into the search box on the left.

Wow. Aren’t you exhausted? What a week that was. Thrilling too. You never knew what was going to come at you next!

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We’ve seen a few sells this week. Stocks worth noting for directors selling activity are Savills (SVS), De La Rue (DLAR), and Hargreaves Lansdown (HL.).

Savills (SVS) directors have been a pretty good signal for future share price performance, but the disclaimer must be ‘the past is no guide to the future, you can lose everything in the stock market’. On the positive side availability of capital should lead to some pick up in activity in real estate, on the negative side look at Savills huge cost base.

Hargreaves Lansdown (HL.) directors say ‘Volatility will impact profit growth’. CFO and Head of Accounting have been selling.

De La Rue (DLAR) CEO and CFO both sold this week, taking profits in a stock which is up 50% relative to the FTSE 250 index. Maybe the good news is all in the price.

On the buy side:

Shire (SHP) directors have been consistent buyers. They have a track record. And five of them are buying. Definitely worth a look.

New World Resources (NWS) fall of 50% in the last three weeks has prompted a number of directors to buy. This coal miner and coke producer is, of course, highly vulnerable to a slowdown in economic activity. The directors seem to be more confident than the stock market.

Heritage Oil (HOIL). We’ve seen a number of buyers in small oil companies over the last two to three weeks, including ROC, Arawak, Heritage, and Serica. This may signal a support level for the energy sector.

And what about Prudential (PRU)? Mark Tucker CEO invested GBP 100k on Monday 15th September at just shy of 500p. He bought 20,000 shares taking his holding to 1.5m shares. I don’t interprete this transaction to be a valuable signal as

  1.  
    1. Only Tucker is buying, no other directors, and
    2. This is a tiny increase in his existing holding. 

Granted, he is up 20% on GBP 100k in a week. Time will tell.

Enjoy the week ahead. Keep calm and think of the long term.

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.

On March 10th I warned, ahead of results, that the risk was on the downside for Savills (SVS, 221p). (See my comment here).

Since that date, Savills are down 37% in absolute terms, and down 27% relative to the FTSE 250.

Over the last few weeks however we’ve seen a bit of life come back to the Agencies (and property management and surveyors etc), in the form of director buying at Colliers Re (COL, 40.5p).

CEO David Izett has trebled the size of his holding by buying 100,000 shares at between 40p and 46p between 26/6 and 1/8.

Non exec Chairman Sir John Ritblat has increased his position in Colliers CRE by almost 50%, buying 300,000 shares at 46p to take him to a holding of 935,000.

These two directors have invested almost £180k between them. Not a huge amount, but the first indicator of value in a dead sector.

Addendum

August 6th :

Further buying has been reported by Colliers CRE as follows

1/8 Non exec Chairman Sir John Ritblat has bought a further 250,000 shares at 40p, taking his holding to 1,195,000 shares.

4/8 Non exec Colin Wagman has bought 50,000 shares at 41p, a maiden purchase for him.

These purchases reinforce the positive case for the agents, and I expect Savills and Colliers to perform well from 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. http://www.guardian.co.uk/business/2007/may/22/housingmarket.houseprices

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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