I’m looking forward to utilising the new, increased £15,000 ISA allowance this tax year, and I expect you are as well. But directors at some companies have already made purchases that smash through £15,000.
Housebuilder Berkeley, like its peers, has been riding the wave of economic recovery. Indeed, the FTSE 250 firm was vying for entry into the elite FTSE 100 at the last index review in March. However, having just missed out on promotion, Berkeley’s shares have gone off the boil, despite the board reiterating its previous guidance that “full year earnings are likely to be towards the top of the range of analysts’ current expectations”.
On Monday this week, the spouse of non-executive director Andy Myers made an ISA-sized purchase at 2,284p a share. Another non-executive director, Adrian Li, who joined Berkeley last September, made a more convincing statement by forking out £229,000 with a maiden 10,000 shares buy at 2,290p a time.
You can buy Berkeley’s shares at around the same price today — on 12 times forecast earnings, and with a dividend policy through to 2015 that analysts reckon will give a whopping current-year yield of 7%.
Fast-expanding internet retailer ASOS, which targets fashion-conscious twentysomethings, is another company whose shares have gone off the boil of late. On 2 April, the £3.6bn titan of AIM — the FTSE’s sub-market for “smaller, growing companies” — last month reported a dive in half-year profits, as higher warehouse costs and start-up losses in China hit the bottom line.
Non-executive Hilary Riva, who joined ASOS only the day before the results, got in with a 2013-14 ISA-sized purchase at 5,034p a share before the end of the tax year. Longer-standing non exec Karen Jones got a better deal a week later when dipping into her purse to the tune of over £60,000: she paid 4,705p a pop for her 1,280 shares.
Today, you can buy into ASOS at around 4,250p. But that still represents a stratospheric rating of 72 times current-year forecast earnings — falling to 52 times next year’s earnings, if analysts’ forecasts of a return to 40% annual earnings growth are on the mark.
Up until recently, Quindell’s shares had more than quadrupled in the space of 12 months to reach an all time high of 44p. However, this AIM-listed insurance technology company took a massive hit last week when a report published by a US group called Gotham City Research claimed the business was “built on sand”, and that the shares were worth just 3p. Quindell responded by issuing a rebuttal of Gotham’s damning allegations and conclusions, and by initiating legal action against those responsible for what it called “this coordinated shorting attack”.
This week, all the members of Quindell’s board of directors have backed up their vocal indignation by putting their money where their mouths are.
On Monday, founder and chairman Robert Terry splashed out £95,000 to buy 500,000 shares at 19p a time, and was joined by the company’s five non-execs who invested a combined £84,000 at 19p-20p a share. Finance director Laurence Moorse joined in on Tuesday with a £20,000 buy at 20p. But Robert Fielding, the below-board-level boss of Quindell’s services division, was a little late to the party, and had to pay 25.4p a share when making a £50,000 investment yesterday.
Quindell’s shares are trading at around 25p at the time of writing. That represents less than seven times current-year forecast earnings. However, one of Gotham’s central points is that while Quindell is reporting supersonic annual earnings increases, cash flow is negative.
G A Chester does not own any shares mentioned in this article.