Shares: Boardroom Bonanza – directors who correctly called the markets – Imaginatik CEO, Mark Turrell, in Top 10

Shares Magazine: Boardroom Bonanza

Published date:

 Thursday, May 7, 2009

Directors know their company like no outsider could ever hope to. But not all of them are good at timing their investments in their own shares. That is why Shares has spent the past year tracking all the major director deals in a huge database to identify the board members worth following.

After recording the key buys and sells we can exclusively reveal who has their finger on the pulse. The top ten performing trades (see table, page 21), have delivered gains of between 211% and 486%. We unearth the motivations behind the deals and lessons to be learnt. Interestingly all of the top ten trades have been purchases made since November with a good number seeing management correctly believing their firms would return from the brink of a debt crisis.

A modest £50,403 acquisition by Wolseley (WOS) chief executive Claude Hornsby was the stand-out call. Made ten days after the builders merchant unveiled a £1 billion cash call, via a rights issue and placing, the 53-year-old correctly took the view a very depressed share price of 202p would quickly rebound as debt fears eased. In a little over a month shares have risen almost six-fold to £11.82, generating Hornsby a bumper 486% return.

Likewise, Davenham’s (DAV:AIM) risk director David Bowles (the eighth highest gain with a buy generating 224%) correctly put his money down in the belief the specialist lender would succeed in refinancing £215 million of banking facilities. Meanwhile, Simon Embley, chief executive of LSL Property Services (LSL) bought last November at 32p, a historic low for the company, as it extended debt facilities to 2011. This trade has since generated 225%, the seventh best return.

Four of the top ten performing directors bought on more than one occasion allowing us to build up a complete picture of their dealing track record. One lesson from this is that directors, like all investors, have trouble timing the bottom. David Radcliffe, chief executive of travel services group Hogg Robinson (HRG) started buying at 11.4p in early December ahead of the hugely profitable purchase at 4p later that month which has since returned 445% and secured him the accolade of the second-best trade.

Likewise, Cryo-Save (CRYO:AIM) non-executive Johan Goossens is 18% down on an early buy of 100,000 shares in September at 71p. But set against three profitable subsequent purchases between 12p and 38p, for a combined £214,300 consideration, the co-founder of the stem cell storage specialist clearly has a better feel for his company’s worth than the market, with his 12p deal now 383% in the money at today’s 58p.

Among our top-ten performing directors we would be cautious of following Imaginatik’s (IMTK:AIM) chief executive Mark Turrell. Contract wins have given credibility to forecasts of maiden operating profit and mean Turrell’s seven purchases last year at between 1.9p and 5.3p per share are in the black. But seven subsequent acquisitions since 2 January have lost him money tarnishing his overall performance.

The ten worst trades of the past year have generated losses of between 46% and 102%, with a sale by Maple Energy (MPLE:AIM) chief executive Rex Canon, at 109p, topping the table. Investors should note it is always harder to read anything into directors’ sales than in it purchases, as there can be many more reasons related to an individual’s circumstances driving a disposal. In Canon’s case it should be remembered the 47-year-old still retains a sizeable 8.9% stake in the business.

Xstrata’s (XTA) chief executive Mick Davis, whose two giant trades of the past 12 months have generated both the biggest monetary gain (£2.6 million) and the second largest monetary loss (£6.1 million), is clearly, net net, a poor indicator of where his company’s shares will go next. The losing trade also secured him number two position in our table of the least profitable deals with a purchase at £41.51 last May, currently down 88%.

Jorge Cosmen, deputy chairman of transport group National Express (NEX), should be used a contrarian signal for watchers of the transport group. His £26.3 million purchase at 870p last May, has since depreciated by 70%, or £18.4 million, and stands out as the worst monetary loss of the past 12 months. But he also bought a further three times and all have been losing trades bringing his total losses for the year to £27.1 million.

Director buying or selling can be a useful signal for outsiders. But it is vital investors consider the subject’s track record as well as fundamental analysis of a firm’s business, strategy and financial performance. Having recorded every single director deal over the past year Shares is in a good position to tell investors who is worth following and who is not.

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Top 10 best transactions by percentage gains

# 10. Mark Turrell 211% gain - Imaginatik (IMTK:AIM)

Turrell, 38, co-founded Imaginatik in 1994. Combined with his experience from Intel and General Motors, his doctoral thesis on collaboration and knowledge management became the basis for his business.

Chief executive Turrell’s vote of confidence drew a line under the falling share price last December, as he bought 55,000 shares at the 1.9p year low. The software company, which offers tools for collaborative problem solving, saw shares fall sharply the preceding October despite its cautiously optimistic trading update, as the market lost its tolerance for companies not yet profitable. Turrell bought another 75,550 shares in January, at 6p to 7.5p, only to see the stock fall back to 4.8p. But with several recent contract wins, the £6.3 million cap expects this year to mark its first operating profit. (JF)

 

See PDF of scanned article – Shares_Imaginatik_May09