Recent results from blue-chip tech giant ARM Holdings (LSE: ARM) (NASDAQ: ARMH.US), mid-cap oil company Amerisur Resources (LSE: AMER) and small-cap engineering recruitment specialist Matchtech Group (LSE: MTEC) have been followed by some hefty director buying.
Should you follow the lead of the directors and buy shares in these three companies?
Leading energy-efficient chip designer ARM Holdings has been punching high earnings growth for years. Earnings are forecast to continue rising at a rate of knots, making ARM a rare beast among the companies in the top third of the FTSE 100; namely, a growth stock.
ARM reported another excellent set of results last week: first-quarter earnings were up by 27%. Chairman Stuart Chambers, who joined the company just over a year ago, decided the time was ripe to increase his shareholding from 10,000 shares to 30,000 shares. He was happy to splash out over £240,000 at 1,204p a share.
ARM’s price-to-earnings (P/E) ratio of 38 is certainly a growth rating. But, with the company’s cash-pile growing ever bigger and abundant opportunities in the “internet of things”, I’d say a high rating is merited. And, as I write, you can buy the shares at a slightly lower price than Mr Chambers was willing to pay.
Mid-cap oil & gas company Amerisur Resources has a market value of around £350m and is a top 50 firm on the AIM market. As with other companies in the sector, profits and sentiment have been hit by the fall in the price of oil. Amerisur’s shares are some 50% below their 52-week high.
Since the company released its annual results earlier this month, directors have been buying shares en masse. Chairman Giles Clarke (founder of Majestic Wine), chief executive John Wardle (ex-BP and an industry veteran) and experienced finance director Nick Harrison all opened their wallets, together with senior independent director Stephen Foss and the company’s three other non-execs. Together they’ve bought just shy of one-and-a-half million shares at prices between 23.75p and 30.5p.
Amerisur is focused on South America, and is profitable (a P/E of 12 based on next year’s forecasts) and well-funded (no debt and $96m cash at the last count). The shares — 33p as I write — have moved up since the director buying, but the company still looks to have potential at this level.
Established in 1984 and listed on AIM in 2006, Matchtech Group has a market cap of around £165m, and is the UK’s leading specialist recruitment agency. Chief executive Brian Wilkinson — a recruitment industry veteran — who joined the board in December 2013, decided to increase his shareholding substantially following the company’s recent half-year results. He took his interest to 45,000 shares from 10,000 shares with a £193,000 buy at 551.43p a share.
Matchtech has been increasing annual earnings by double-digits since the recession. A dip to single-digit growth is forecast for the current year, but a return to double digits (15%) is pencilled in for next year. The company appears to be quite attractively rated on a forward P/E of 11 and prospective dividend yield of over 4%. And you can currently buy the shares at a slightly lower price than Mr Wilkinson was happy to pay.