Directors have been splashing the cash at Standard Chartered (LSE: STAN), Talktalk Telecom (LSE: TALK) and International Personal Finance (LSE: IPF). Should you follow their lead, and load up on shares of these three companies?
Standard Chartered
Bill Winters, the new chief executive of troubled Asia-focused FTSE 100 bank Standard Chartered, last week announced the outcome of a strategic review. His turnaround plans for the bank include raising £3.3bn in a rights issue.
The company said: “The Directors and the Management Team are fully supportive of the Rights Issue and those that are entitled to intend to take up their rights in full”.
Not content with taking up their rights, a number of directors and managers have this week also bought shares in the market, as summarised in the table below.
| Name | Number of shares |
Price per share |
Total investment |
|---|---|---|---|
| Michael Gorriz (chief information officer) | 8,403 | 589.9p | £49,569 |
| Ajay Kanwal (regional CEO – ASEAN and South Asia) | 10,000 | 597.4p | £59,750 |
| Sunil Kaushal (regional CEO – Africa & Middle East) | 20,000 | 598.8p | £119,760 |
| Sir John Peace (chairman) | 50,000 | 591.2p | £295,600 |
| Pam Walkden (interim chief risk officer) | 20,000 | 589.7p | £117,940 |
| Bill Winters (group CEO) | 168,000 | 599.1p | £1,006,488 |
Standard Chartered’s shares have lost two-thirds of their value since early 2013, as the bank has suffered regulatory punishments and hefty write-downs. A turnaround won’t be quick or easy, but the new chief executive and his team have certainly nailed their colours to the mast with these share purchases.
Standard Chartered is trading on 10 times forecast 2016 earnings, giving a wide margin of safety, and could prove to be a great recovery stock. Furthermore, you can pick the shares up today at a slightly lower price than the directors paid: 580p, as I write.
Talktalk Telecom
A decline in Talktalk’s shares since reaching an all-time high of over 400p in the early summer has been exacerbated by a recent cyber attack. Nevertheless, chief executive Dido Harding was upbeat in announcing the FTSE 250 firm’s half-year results this week.
Harding is expecting a significant step-up in profits in the second half and that the company will meet market expectations for the full year (excluding the one-off financial impact of the cyber attack). Talktalk said early data on customer churn and retention activity in the days since the attack is encouraging, with Harding adding that the business “remains well positioned to deliver strong and sustainable long term growth”.
And it’s not mere idle talk from the Talktalk boss. She immediately put her money — £100,000 of it — where her mouth is, buying 40,966 shares at 244.1p a pop. Harding paid 17.7 times forecast earnings for the company’s current financial year (ending 31 March 2016), and locks in a chunky dividend yield of 6.5%. With strong earnings and dividend growth to come, the earnings multiple falls to 11.4 for fiscal 2017 and the yield rises to 7.2%.
The mini-crisis of the cyber attack appears to be providing an opportunity to pick up a strong growth and income stock at a very reasonable price. The shares remain on offer at around the price Harding paid.
International Personal Finance
On first sight, the list of recent director dealings at FTSE 250 firm International Personal Finance doesn’t look particularly auspicious. That’s because it includes a sale of 20,585 shares by chief commercial officer David Broadbent, with a further 29,415 shares disposed of by his wife. However, the couple retain 207,989 shares between them, and the company announcement explains that the shares they sold were “to part fund the acquisition of a residential property”.
At the same time as the Broadbents were raising cash towards a house, non-executive director Jayne Almond and her spouse were buying shares — 21,300 at 369p and 20,000 at 379p, respectively — for a combined investment of £154,397. The Almonds were joined by senior independent non-executive director Tony Hales, who splashed out £95,000 on 25,000 shares at 380p.
International Personal Finance said in a Q3 trading update at the end of last month that it expects its full-year result to be “broadly in line with consensus”. You can pick the shares up today a bit cheaper than the directors paid. At 360p, as I’m writing, you’d be paying just 9.8 times the current-year forecast earnings, with a useful 3.7% dividend yield.
