Directors have been buying shares with a vengeance at Monitise (LSE: MONI), Hutchison China MediTech (LSE: HCM) and Tungsten (LSE: TUNG).
Is the time ripe for investors to follow the lead of the directors, and buy into these three companies?
Monitise
AIM-listed mobile money firm Monitise put itself up for sale in January. However, two weeks ago this £300m company said that none of the proposals it had received “fully recognised the longer-term value of Monitise”, and that the company would continue as an independent entity.
At the same time, Monitise announced a boardroom shake-up, which included founder and co-CEO Alastair Lukies stepping down, and co-CEO Elizabeth Buse becoming sole CEO. Last week, the directors were buying en masse.
| Director | No. of shares | Price per share | Total investment |
| Elizabeth Buse (CEO) | 500,000 | 13.25p | £66,250 |
| Lee Cameron (Deputy CEO) | 250,000 | 13.25p | £33,125 |
| (Spouse of) Tim Wade (Non-exec) | 250,000 | 14.14p | £35,350 |
| Colin Tucker (Non-exec) | 100,000 | 14.19p | £14,190 |
Personally, I’m not convinced the levels of these buys represent anything more than a “show” of confidence. Monitise still has to prove it can make money from its impressive blue-chip roll-call of strategic investors, channel partners and clients such as Santander, MasterCard, IBM and Royal Bank of Scotland. Potentially, though, the rewards could be huge — even for those punting today at a higher price (15.75p) than the directors bought at.
Tungsten
Founded by City financier Edmund Truell, Tungsten describes itself as “a leading provider of automated invoice processing, supply chain finance and spend analysis”. Like Monitise, Tungsten has an impressive array of blue-chip clients, including GlaxoSmithKline, Unilever and Aviva. Also like Monitise, Tungsten is currently loss-making.
Investors are divided about this £220m company. On one hand, there is some heavyweight institutional support on the shareholder register — notably Odey Asset Management — but, on the other, Tungsten is reportedly the most heavily shorted stock on the AIM market.
Founder and CEO Edmund Truell has backed his company to the hilt, recently adding to his already-substantial shareholding. Between 27 February and 31 March, Truell purchased 1.59 million shares in six tranches at a cost of £2.73m. He bought at prices between 147p and 201p a share, with the average working out at 172p. If you want to take a punt on Tungsten, the shares are trading at 198p, as I write.
Hutchison China MediTech
Hutchison China MediTech — or, Chi-Med as it refers to itself — is the eighth-largest company on the AIM market, valued at £730m. Chi-Med has a drug R&D division and a consumer healthcare division, and has partnerships with blue-chip giants, including AstraZeneca, Eli Lilly and Johnson & Johnson. And guess what? Chi-Med is actually profitable. Hurrah!
Sure, the P/E may be high at 75 times current-year forecast earnings, but the company’s pipeline has the potential to yield multiple new drug approvals. The high P/E hasn’t put off Chairman Simon To and non-exec director Edith Shih, who’ve both bought several tranches of shares between 30 March and 7 April, paying between 1,300p and 1,385p a share. To has invested over £1m and Shih over £0.5m. If you want to follow suit, Chi-Med’s shares are currently trading at 1,392p.
