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On October 12th I pointed to Xstrata (XTA, 862p) non execs purchases as an early positive (although not strong) signal for Xstrata “Xstrata non execs catch a falling knife”.

I was particularly impressed by the volume and timing of selling by Xstrata management earlier in the year:

“If we look back to earlier this year, a number of executive directors including Trevor Reid (CFO), Santiago Zalmdumide (Executive Director), and Michael Davis (CEO) all exercised options and sold all their shares at between 3470p and 4342p (source: Company website, Digitallook, London Stock Exchange)” .

Since October 12th Claude Lamoureux (non exec) has invested another GBP 50k or so by buying 5000 shares at 1093p (November 7th), and David Rough (non exec) has bought 3000 shares at 681p (November 21st).

I use this post only as an opportunity to highlight Mr Roughs investment skills:

Rough sold 3605 shares in Xstrata at 3508p in March 2008.

Rough bought 3000 shares in Xstrata at 681p on November 21st 2008.

David Rough has an extensive history in investing, retiring in 2001 from his position as Chief Investment Officer for Legal and General, but maintaining non exec positions at Xstrata, Land Secs and Friends Provident.

Mr Rough, who joined L&G from Royal Insurance in 1989, earned a reputation for being almost alone among fund managers in openly criticising companies or institutions for treating shareholders in a shoddy way. He is also credited with being behind the fast growth of L&G’s fund management arm, which has expanded from £18.5bn to £113bn in the last 10 years and was adding £1bn a month by last year. (Independent October 19 2001).

View on Xstrata- remains positive – directors buying.

Strength of signal- MEDIUM- three non execs buying shares. Will turn to ‘strong’ when we see an executive director buying shares.

 

 

Two non execs have decided enough’s enough, and ‘caught the falling knife’ by buying shares in Xstrata (XTA, 1310p).

Ian Strachan on October 2nd bought 5700 shares at GBP 17.19, investing GBP 97k and increasing his holding by over 60%. His colleague Claude Lamoureux on October 9th bought 4000 shares at GBP 13.78, investing GBP 55k. I don’t think he held any shares prior to this purchase.

If we look back to earlier this year, a number of executive directors including Trevor Reid (CFO), Santiago Zalmdumide (Executive Director), and Michael Davis (CEO) all exercised options and sold all their shares at between 3470p and 4342p (source: Company website, Digitallook, London Stock Exchange)_ Usual behaviour by directors is to sell a number of shares sufficient to pay the tax on the exercised share options, usually 40%. I’m not sure what the tax liability would be for these directors.

A sale of all the shares exercised indicates to me that they thought the shares were fully valued. How right they were. The share price of Xstrata fell from a high of 4420p in May to 1223p last week. 

Are the purchases by the two non execs of significance? Yes, they are significant in $$ terms, in terms of increase in shareholdings, and there are two directors acting.

Value of signal: Positive- Directors buying shares

Strength of signal: Medium

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