Thursday 28 June 2012

Insider Selling: Beware

A lot of investors ignore insider selling, that is selling of shares by directors. Of course sometimes directors will sell shares in their own companies but when the selling is significant I am always wary to invest. Afterall these are the people who know more about the business than any analysts do. If the directors don't have confidence in their own businesses then why should you? Insider selling can also be a good signal that not all is right in the company. Especially with companies that look cheap we have to be extra careful. If our valuation of the company makes it look a very attractive investment and the directors are running for the hills then there is a good chance that there is something wrong with the company that is not apparent in the fundamentals. If the company looks expensive by our valuation and the directors are selling then they might just be cashing in some chips and investing in something they see as giving higher returns (eg property).

Recently I posted a list of FTSE 100 individual stocks with their expected returns.

Using data from digitallook.com I have complied a table of the top 10 of the list (the best value shares) showing director buying and selling in the last 12 months together with the net buying or selling:


Share Buying Selling Total
BT £42,820 £5,220,072 -£5,177,252
Vodafone £21,143 £2,630,559 -£2,609,416
Legal & General £25,734 £2,233,156 -£2,207,422
RSA £1,198 £2,059,133 -£2,057,935
Aviva £246,018 £984,375 -£738,357
Scot & South Energy £624 £196,742 -£196,118
BAE Systems £594,138 £613,126 -£18,988
Resolution £0 £0 £0
ICAP £78,825 £49,613 £29,212
Standard Life £193,258 £137,272 £55,986




I've ranked the shares in order of net selling.

Looking at the top 4 in the list they all have insider net selling of over GBP2m and in the case of BT over GBP5m has been offloaded. In these cases I'd be cautious.

For Aviva there is fairly significant net selling but their has also been fairly substantial buying over the last 12 months too.

For the other companies on the list the amounts are low enough to be insignificant. In the case of BAE Systems the selling took place at the beginning of the period and the buying back of shares is more recent. If you changed the time frame to the last 6 months there would be a fairly substantial amount of net buying.

FTSE 100: Individual Stocks (Updated)

Last month I compiled a list of the stocks in the FTSE 100 index ranked in order of expected returns based on our model. You can see last month's list here.

The list actually performed well. Investing in the top 5 (+6.0%) or top 10 (+2.9%) would have beaten the FTSE100 as a whole (+2.3%). Also investing in the bottom 5 (+1.8%) or bottom 10 (+0.8%) on the list would have lagged the market. The figures also ignore dividends (remember the average dividend yield on the top 10 is over 6% and on the bottom 10 is around 1% so this would make investing in the shares at the top of the list even more attractive).

The best performers in the top 10 last month were SL (+10%) and LGEN (+12%) the worst being RSL which dropped 6%. In the bottom 10 Randgold performed best gaining 11% and Aggreko was the worst with a fall of 8%. Shire was down 9% at one point but has recovered a bit over the last few days to be 4% down.

Below is the current list:


Last Month
Share
Price
Analyst growth
Current Yield
3yr yield
Growth
Adjustment
Total
1
Aviva
266
2.9%
10.3%
9.5%
1.2%
0.0%
10.61%
2
Vodafone
182
15.0%
7.6%
4.9%
6.0%
-0.6%
10.32%
3
RSA
106
2.9%
9.1%
8.2%
1.1%
0.0%
9.39%
6
Resolution
191
3.1%
11.1%
7.1%
1.3%
0.0%
8.35%
4
Standard Life
226
5.9%
6.8%
5.8%
2.4%
0.0%
8.11%
7
BAE
280
3.5%
7.2%
6.2%
1.4%
0.0%
7.63%
9
SSE
1379
4.5%
6.3%
5.4%
1.8%
-0.1%
7.19%
8
BT
206
13.8%
5.2%
3.7%
5.5%
-2.0%
7.16%
5
L&G
124
11.7%
6.4%
4.0%
4.7%
-1.5%
7.15%
10
ICAP
344
3.5%
6.8%
5.8%
1.4%
0.0%
7.15%
12
AstraZenica
2794
2.7%
6.8%
5.8%
1.1%
0.0%
6.91%
18
M&S
320
5.3%
5.9%
5.1%
2.1%
-0.4%
6.85%
11
Admiral
1152
15.0%
7.8%
3.3%
6.0%
-2.5%
6.77%
14
National Grid
665
2.3%
6.2%
5.7%
0.9%
0.0%
6.62%
15
Centrica
315
6.4%
5.5%
4.5%
2.6%
-1.0%
6.06%
13
HSBC
571
8.2%
5.4%
4.1%
3.3%
-1.4%
6.02%
54
Severn Trent
1623
7.3%
5.0%
4.3%
2.9%
-1.3%
5.91%
21
Morrisons
265
11.0%
5.0%
3.6%
4.4%
-2.1%
5.88%
16
GSK
1479
6.4%
5.4%
4.4%
2.5%
-1.1%
5.87%
19
British Land
508
2.7%
5.4%
5.1%
1.1%
-0.4%
5.87%
22
Tesco
310
5.5%
5.3%
4.5%
2.2%
-0.9%
5.80%
17
Aberdeen
256
15.0%
5.0%
2.9%
6.0%
-3.2%
5.66%
20
RDShell 'B'
2185
3.1%
5.2%
4.9%
1.3%
-0.6%
5.60%
25
Sainsbury's
295
2.0%
5.7%
5.1%
0.8%
-0.3%
5.57%
24
Imp Tobacco
2440
10.4%
4.8%
3.4%
4.2%
-2.3%
5.31%
26
Reed Elsevier
496
6.0%
4.9%
4.2%
2.4%
-1.4%
5.23%
23
BritAm Tobacco
3231
9.6%
4.7%
3.5%
3.9%
-2.2%
5.14%
27
Ashmore
335
7.1%
5.0%
3.9%
2.8%
-1.7%
5.10%
40
WPP
755
14.4%
4.3%
2.6%
5.8%
-3.8%
4.56%
28
United Utilities
662
0.8%
5.4%
4.8%
0.3%
-0.6%
4.56%
34
Stan Chartered
1369
9.1%
4.2%
3.3%
3.6%
-2.5%
4.40%
29
BHP Billiton
1738
8.9%
4.4%
3.3%
3.5%
-2.5%
4.34%
45
IMI
800
9.2%
4.5%
3.2%
3.7%
-2.6%
4.25%
33
Rexam
408
11.1%
4.4%
2.8%
4.4%
-3.3%
3.96%
30
CRH
1116
1.2%
4.6%
4.5%
0.5%
-1.0%
3.95%
42
Amec
965
12.4%
4.0%
2.6%
5.0%
-3.7%
3.84%
31
Old Mutual
150
11.8%
4.8%
2.7%
4.7%
-3.6%
3.83%
52
Tate & Lyle
636
4.6%
4.3%
3.7%
1.8%
-1.9%
3.69%
36
Barclays
196
13.3%
3.9%
2.4%
5.3%
-4.1%
3.59%
51
BSkyB
677
9.2%
4.1%
3.0%
3.7%
-3.0%
3.59%
39
Unilever
2104
15.0%
4.0%
2.2%
6.0%
-4.6%
3.57%
37
Land Sec
738
3.7%
4.2%
3.8%
1.5%
-1.8%
3.54%
49
Smiths
995
5.7%
4.1%
3.5%
2.3%
-2.2%
3.53%
44
Hammerson
432
4.4%
4.2%
3.7%
1.8%
-2.0%
3.53%
35
Capita
650
8.8%
3.9%
3.0%
3.5%
-3.0%
3.48%
48
Kingfisher
283
11.6%
3.9%
2.5%
4.6%
-3.8%
3.34%
38
Prudential
723
7.2%
4.0%
3.2%
2.9%
-2.7%
3.33%
41
Sage
271
7.4%
4.2%
3.1%
3.0%
-2.9%
3.17%
47
G4S
279
9.0%
3.6%
2.8%
3.6%
-3.3%
3.13%
63
J Matthey
2155
13.3%
3.3%
2.2%
5.3%
-4.6%
2.93%
43
Pearson
1233
6.3%
3.9%
3.1%
2.5%
-2.8%
2.92%
50
Next
3150
9.7%
3.4%
2.6%
3.9%
-3.7%
2.80%
64
Petrofac
1364
13.1%
3.5%
2.1%
5.2%
-4.6%
2.78%
55
Compass
657
10.1%
3.6%
2.5%
4.0%
-3.8%
2.77%
53
H Lansdown
511
15.0%
4.9%
1.9%
6.0%
-5.2%
2.64%
32
Vedanta
882
1.9%
4.1%
3.7%
0.8%
-2.0%
2.45%
61
R Benckiser
3366
2.7%
3.9%
3.4%
1.1%
-2.4%
2.04%
56
Diageo
1633
9.2%
2.9%
2.3%
3.7%
-4.2%
1.83%
58
SABMiller
2538
11.6%
2.9%
2.0%
4.6%
-4.9%
1.75%
60
Meggitt
373
7.7%
3.3%
2.5%
3.1%
-3.8%
1.74%
57
Rolls Royce
849
12.3%
2.6%
1.9%
4.9%
-5.2%
1.66%
59
Schroders
1298
5.0%
3.3%
2.7%
2.0%
-3.4%
1.32%
66
Burberry
1340
15.0%
2.6%
1.5%
6.0%
-6.4%
1.08%
70
Wier Group
1454
11.2%
2.8%
1.9%
4.5%
-5.3%
1.04%
62
Whitbread
2030
8.1%
3.0%
2.2%
3.3%
-4.5%
0.96%
67
Bunzl
1032
6.9%
2.9%
2.3%
2.8%
-4.3%
0.81%
71
Experian
899
9.7%
2.7%
2.0%
3.9%
-5.0%
0.81%
74
Xstrata
799
9.6%
3.8%
1.9%
3.8%
-5.1%
0.72%
69
Rio Tinto
2905
7.2%
3.7%
2.2%
2.9%
-4.5%
0.57%
65
ABF
1267
10.0%
2.4%
1.8%
4.0%
-5.4%
0.47%
72
Croda
2160
10.7%
3.1%
1.7%
4.3%
-5.6%
0.35%
68
IntCon Hotels
1530
7.4%
2.6%
2.0%
3.0%
-4.9%
0.06%
73
Intertek
2620
15.0%
1.8%
1.1%
6.0%
-7.7%
-0.58%
75
Int Power
418
1.3%
2.8%
2.4%
0.5%
-4.0%
-1.11%
77
Serco
527
9.2%
1.9%
1.4%
3.7%
-6.6%
-1.56%
76
Antofagasta
1047
15.0%
3.6%
0.9%
6.0%
-8.5%
-1.61%
78
Smith & N
619
5.8%
2.0%
1.6%
2.3%
-5.9%
-1.98%
79
Aggreko
1988
13.2%
1.3%
0.9%
5.3%
-8.8%
-2.62%
80
BG Group
1258
8.8%
1.4%
1.1%
3.5%
-7.7%
-3.12%
81
ARM
496
15.0%
1.0%
0.6%
6.0%
-10.6%
-3.96%
82
Tullow
1425
15.0%
0.8%
0.4%
6.0%
-12.8%
-6.40%
84
Shire
1818
11.1%
0.7%
0.5%
4.4%
-11.6%
-6.75%
83
Randgold
5691
15.0%
0.8%
0.3%
6.0%
-13.7%
-7.43%


Not many major changes, but share price movements and analyst forecast adjustments have moved a few companies up or down the rankings. Although there are no changes to the top or bottom 10 shares.

Noteable movements include Marks and Specners (MKS.L): Up 6 places to 12th, reduction in the growth rate forecast and a 8% fall in the share price. Severn Trent (SVT.L): Up 37 places to 17th, increase in the growth rate, 3 year average dividend increase and a 4.5% drop in the share price. A major faller is Vendata (VED.L) falling 24 places to 56th, lower growth rate forecast.

Note that this list is just based on raw data, before buying any of these stocks it's best to check dividend cover, technical price action, insider dealings, etc.