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FOOL'S EYE VIEW
By
Rochester, Kent – After the latest stock market nosedive, are you sniffing around for bargains? If so, pay attention to the directors of technology companies. Unlike most ordinary investors, they were prominent sellers of shares during the Tech Bubble of 2000. And having bailed out when valuations became irrationally optimistic, it's likely that any substantial buying by "tech directors" will indicate that valuations have become irrationally depressed. Although various studies have suggested there is no correlation between a director dealing in his company's shares and the subsequent share price performance, the real world evidence from the tech directors is compelling. Across numerous companies of differing size and industry, here are a few examples of tech directors cashing in on the TMT boom of twelve months ago. Atlantic Telecom Nicholas Berry of Atlantic Telecom (LSE: ATN) received £37.2m after selling two-thirds of his holding at the 930p mark in February 2000. Atlantic shares now trade at 31p, following the general telecom sector malaise and Atlantic's widening losses. CMG Three CMG (LSE: CMG) directors raised significant sums in February and March of last year. Cor Stutterheim and Barbara Ward both received £6.7m after selling part of their holdings at 1,676p. Chris Banks raised £6.3m by selling half of his holding at an average price of 1,469p. After warning of slowing sales growth last year, CMG shares now stand at 740p. Computacenter Tony Conophy of Computacenter (LSE: CCC) sold 60% of his holding for £11.75 a share in January 2000. He raised £7.1m. After various profit warnings, Computacenter shares now stand at 383.5p. NSB One of the biggest beneficiaries of last year's stock market optimism was Seale Moorer of NSB Retail Systems (LSE: NSB). He raised a staggering £103m last March by selling half of his holding at 305p. Nikki Bennett also took the opportunity to cash in, realising £6.1m. Subsequent dreary results and problematic acquisitions have since sent NSB shares tumbling to 72.5p. Psion Four directors of Psion (LSE: PON) bailed out at the top twelve months ago when their company's shares stood at 1,310p. After various disposals, David Potter raised £65.5m, Daniel Fiszman and Charles Davies each raised £16.4m, while Andrew Clegg raised £3.3m. Following a handful of profit warnings, Psion shares now languish around the 115p mark. Royalblue Similar to Psion, there was also a boardroom sell-out at Royalblue (LSE: RYB) a year ago. John Hamer, Colin Amies, Chris Aspinall and Alan Nielson each received between £1m and £5m after selling large chunks of their holdings at the 2,100p level. Royalblue shares now stand at 1,020p, having tumbled due to a dip in annual profits. Sema Pierre Bonelli of Sema (LSE: SEM) sold half of his holding for an average price of 1,433p in December 1999 and February 2000. He received £4.4m for his trouble. However, problems stemming from the acquisition of an American software firm led to a profit warning late last year. Sema investors have been rescued by Schlumberger (NYSE: SLB), who have since offered 560p for each Sema share. Staffware John O'Connell and Paul Fullagar of Staffware (LSE: STW) raised £3.7m each when their shares touched 3,650p in March 2000. Fellow director Emrys Devonald picked up £1.1m when he too took advantage of the then stock market conditions. Staffware shares now trade at 1,437p, after succumbing to the general tech sell-off. Almost everybody was selling... There were plenty of other tech companies that had directors selling their ordinary shares too. Certain directors of ARM Holdings (LSE: ARM), AIT Group (LSE: AIT), Freecom.net (LSE: FEE), Photo-Me International (LSE: PHTM), Rage Software (LSE: RGE), Sci Entertainment (LSE: SEG), Triad (LSE: TRD) and Synstar (LSE: SYN) all disposed of £1m-plus worth of shares during late 1999/early 2000. Valuation concerns or profit warnings have since battered each of those company's share prices in the past year. And notably, underpinning the general share dealing skill of the tech directors is their distinct lack of buying during the first quarter of 2000. Only one tech director bought heavily during that time, he being Robert Bonnier of Scoot.com (LSE: SCO). In March last year, Bonnier bought £2.3m-worth of his company's shares at an average price of 254p. Undaunted by his shares slipping under the 200p level, he topped with a £5.8m purchase at an average price of 193p in June. Scoot shares now stand at 24p, having succumbed badly in the tech stock turmoil. Watch the directors The evidence is clear. The vast majority of tech directors can either spot irrational valuations, industry trouble looming, or both. Their actions plainly speak louder than their words. For those hunting for tech stock bargains, an eye must be kept on tech director dealings. In short, when we see numerous tech directors investing £1m-plus in their own company, especially from those who presciently cashed in at the top, it will indicate that the tech stock tide is about to turn. More Are directors smart? | Should you follow directors' dealings? | Directors' dealings -- the road to wealth?