Many investors like to keep up to date with share deals of company directors. It can be a useful barometer of a company’s health on the basis that if those closest to the operating coalface are putting money in (or talking cash out), perhaps other investors should think about doing likewise.
It is not a perfect science by any means but when an insider purchases or sells a significant amount of stock, it can be a sign that the company’s fortunes are changing. We have used the director dealings page on our website to highlight a few of the most interesting deals over the last week.
TERRY SMITH BACKS HIS FUNDSMITH TEAM
Stock-picking legend Terry Smith has backed his Fundsmith Emerging Equities Trust (FEET) just days after taking a more backseat day-to-day role.
The author of popular investment title Accounting for Growth has increased his personal holding by forking out £1.2m of his own cash to buy 100,000 shares.
That takes his overall stake in the fund to 762,000 shares, or 2.86% of the total stock, a fair slug for an individual.
Smith swept into the headlines recently after announcing that he planned to step down from the role of lead manager at the end of May. Michael O’brien and Sandip Patodia have been promoted to portfolio manager and Assistant portfolio Manager respectively.
The news triggered a fall in the shares on the day, and it seems that Smith has taken advantage of the stock weakness.
This underlines his belief in the new managers and the long term prospects for the trust, while demonstrating his trading skills have not diminished.
No change of style is expected following the change in leadership, and Smith will be on hand to offer advice and support through his chief investment officer role.
REVOLVING DOOR AT SCAPA
In a sign of confidence for embattled tapes maker Scapa (SCPA:AIM), chief executive officer (CEO) Heejae Chae spent £201,629 buying 109,700 shares at 183.8p.
He owns just under a million shares in the company.
Scapa has been through a tough time with the shares down over 50% in the last six months. Following the annual results on 21 May, the CEO announced that he was leaving the group with no explanation offered.
Despite the lacklustre share price performance in recent months investors clearly didn’t like the news, sending the stock plunging 22% on the day.
Just a few weeks later the company announced that it had lost a ‘material contract’ with ConvaTec (CTEC), just three years into a five year supply agreement. The deal had been previously valued at up to $30m a year.
Again the market’s response was brutal and the shares fell another 45%.
Yet in another twist to the story Chae has since had a change of heart and announced that he would stay on, presumably to guide them through this particularly difficult period that lay ahead. This gave the shares a boost, rising 10% on the day.
At this point the company was able to quantify the impact from the lost contract, estimating it would cost them £13m, some 43% of expected full year earnings to March 2020.
IG DESIGN CHAIRMAN WRAPS UP SHARE SALE
Wrapping paper, crackers and cards maker IG Design (IGR:AIM) has seen its chairman John Charlton sell 320,000 shares at 604.5p per share. That nets Charlton a cool £1.9m just days after the company reported strong full year results, with pre-tax profits up 39% to £30.3m.
Charlton has been chairman of the £480m-odd company for nine years. This latest share sale cuts his stake in the company roughly in half, leaving him with 337,500 shares, but that remaining stake is still worth more than £2m, so he is still attuned to the interests of the wider shareholder base.
Mr. Charlton purchased his shares in July 2013 for 30p, so he has made around 20-times his initial stake, turning £179,000 into £3.5m over the last six years. IG Design is a good example of what can happen when rising earnings are accompanied by an increased rating.
Earnings have grown at a compound average growth rate of circa 30% over the last six years, while the price earnings ratio has risen from six to 29 a the share price soared.