Directors have been splashing the cash at Standard Chartered (LSE: STAN), Hutchison China MediTech (LSE: HCM) and Britvic (LSE: BVIC). Should you follow their lead and load up on shares of these three companies?
At one time the highly-rated darling of the FTSE 100 banks, Asia-focused Standard Chartered has suffered a spectacular fall from grace. The shares, which were pushing close to £20 in 2010, were trading at just a tad over £4.40 when chief financial officer Andy Halford waded into the market last Thursday.
Mr Halford splashed out £616,644 on 140,000 shares, buying at a discount of more or less 50% to the bank’s tangible net asset value, and 10.6 times forecast 2017 earnings.
Of course, Standard Chartered is in the midst of a restructuring as it seeks to tighten risk controls and improve cost efficiency, so asset values and earnings forecasts may be vulnerable to downward revision. Judging the right time to buy into a recovery story is always difficult — and managing to buy at the very bottom is a matter of pure luck — but Mr Halford evidently sees good value at £4.40.
The shares are up to £4.66, as I’m writing, but that needn’t put you off: chief executive Bill Winters and a number of other execs saw value at around £6 when buying heavily four months ago.
Hutchison China MediTech
Hutchison China MediTech (Chi-Med) holds the distinction of being a rare London-listed Chinese company that hasn’t destroyed investors’ wealth and disappeared into oblivion.
The AIM-listed healthcare group had already grown to be valued at over £1bn before recently also listing $101m of American depositary shares (ADSs) on the Nasdaq stock exchange.
At the end of last week, Chi-Med’s chief executive, Christian Hogg, bought 36,600 ADSs at $13.50 a pop. An ADS represents one half of one ordinary share, so Mr Hogg’s purchase was the equivalent of 18,300 shares at a bit over £19, for a total outlay of around £350,000.
Chi-Med’s revenues are growing fast — up 104% last year — but the company continues to plough profits from its commercial arm (prescription and over-the-counter business) into advancing its exciting drugs pipeline. The company is difficult to value, but you can buy the shares today at the same level at which the chief executive was happy to buy.
Soft drinks group Britvic has made a strong recovery since the 2008/9 financial crisis, including fighting off a takeover bid by fellow FTSE 250 firm AG Barr in 2013. However, Britvic’s shares have been moving sideways in a £6.50 to £7.50 trading range for a couple of years. There’s been no significant director buying during the period … until this month.
New non-executive director Sue Clark (also currently managing director of SABMiller Europe) made a maiden purchase of 15,000 Britvic shares at just above £7 a share, for a total investment of £105,235 — or, about twice her basic fee as a non-exec.
The purchase came after Chancellor George Osborne’s budget announcement of a sugar levy on soft drinks. The shares are only marginally higher today, and a rating of around 15 times forecast earnings for the company’s financial year ending 30 September, with a dividend yield above 3%, looks decent value.
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G A Chester has no position in any shares mentioned. The Motley Fool UK has recommended Britvic. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.