MARKET COMMENT
Director Buying Highlights Shares To Watch

By Maynard Paton (TMFMayn)
March 26, 2003

Investors have long debated the merits of examining director share buying. Are they shrewd purchases from those really in the know? Or are directors too emotionally involved with their company to take an objective view? There's plenty of evidence for and against examining their trades.

Whatever your thoughts on the subject, it's worth noting the past year has seen many directors top up their holdings. Figures from directorsdeals show 4,522 company directors bought shares in their own company during 2002, opposed to 1,042 who sold.

However, the boardroom buy transactions, while greater in number, are smaller in value. Last year, £310m was spent buying shares, whereas £442m was raised from selling. The trend has continued into 2003. In January, 289 directors spent £18m on company shares, while 59 sold £8m. The only conclusion to be drawn from these statistics is the market looks good value generally, albeit with selected spots of over-valuations.

For followers of directors' dealings, the weekend Financial Times is probably the easiest and cheapest way of pinpointing shares worth following up. Of course, investors have to be selective; ignore the token gestures and focus on the really big trades.

In last Saturday's FT, two companies stood out. On the buy side, there was Canary Wharf (LSE: CW), in which director Michael Price (via an investment fund in which he is managing director) bought over £5m-worth of shares at about 167p. On the sell side, three directors of iSOFT (LSE: IOT) recently disposed of 10m shares and netted a whopping £21.5m, which looks very bearish.

Will these transactions prove to be good investment indicators? To help answer that question, it's worth revisiting this article from last July. At the time, five shares were spotlighted:

Share             Director        Price    Price   Change
                   trade           then     now   

Newcastle United    Buy             23p     31p     +35%
Chelsea Village     Buy             18p     14p     -23%
Enterprise          Sell           270p    230p     -15%
Tribal              Sell           280p    259p      -8%
KS Biomedix         Sell          22.5p      7p     -69%

Only one of the five turned out to be a contra-indicator.

More: Director Buying Could Signal Cheap Market