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The bosses who have made a mint by dealing shares amid Covid-19
It can be useful to keep an eye out for directors that are buying and selling shares in their own companies.
There is a simple reason for this; those at the top should know the state of their businesses better than anyone and so a chief executive investing his or her hard-earned cash into a company can provide a measure of confidence in its prospects.
Conversely, people with a negative view of a stock will latch onto a significant share sale, as this can sometimes indicate something is amiss, with a downswing in fortunes and the share price potentially on the cards. Alternatively it could mean the director in question believes the market valuation of a firm is too high.
The first six months of 2020 has been a tough period for investors with the stock market bottoming on 23 March due to coronavirus-driven panic selling before rallying strongly as investors priced in various recovery scenarios.
Using the Director Deals tool on the Shares website, we have analysed data to identify some of the most interesting director trades during this period.
WHO HAS MADE A MINT?
Mark Dixon, the founder and CEO of serviced office group
IWG (IWG), has consistently been buying shares in his serviced office charge, though a pair of mid-March purchases during the market meltdown proved particularly profitable. Dixon snapped up two tranches of shares at 115.2p and 151.2p that have subsequently generated a combined gain of over £5 million as shares in IWG have rallied to 276.8p.
After hovering around the 440p mark at the start of the year, IWG’s shares took a big hit with many investors concerned that the pandemic could lead to permanent changes in working practices as more companies and people become accustomed to working remotely.
However, IWG and Dixon see an opportunity post-coronavirus for more demand for flexible workspace and the company has raised cash for an aggressive expansion, buying struggling rivals and taking on empty space from landlords.
Also in the money is Plus500’s (PLUS) CEO Gal Haber, who spent over £1.39 million on 174,624 shares at 797.6p in late March and is now sitting on a £971,608 gain on this well-timed trade.
Shares in the trading platform have subsequently ticked up to £13.54, a rise of almost 70%, as the market volatility of recent months enticed more punters to its platform.
Relatively new Reckitt Benckiser (RB.) chief executive Laxman Narasimhan is another boss to have made a very lucrative trade during the dark days of March. He invested around £1 million acquiring 17,241 shares in the Dettol-to-Durex supplier at £58-a-pop as markets went into meltdown. Investors who followed his lead will have also made out like bandits because shares in the consumer goods colossus now trade at £74.94, leaving Narasimhan sitting on a quick paper gain of £292,063.
Reckitt Benckiser’s shares have appreciated significantly during the pandemic with investors pricing in buoyant demand for its Lysol and Dettol disinfectants, Mucinex cough treatment and Nurofen painkiller brands.
And last but not least, William Hill (WMH) chief executive Ulrik Bengtsson took advantage of the gambling and betting group’s weak March price tag to snap up a tranche of shares at 39.83p. A subsequent near-doubling of the William Hill share price means Bengtsson’s purchase has been rewarded with a £57,450 paper gain in just over three months.
The stock market’s strong rebound has also provided an opportunity for directors to de-risk portfolios by taking significant sums of money off the table.
Among them is Mark Coombs, billionaire founder and CEO of emerging markets asset manager Ashmore (ASHM), who promises to sell up to 4% of his shares per year. During June, one trade saw Coombs sell 10 million shares in his charge at 435p, raking in a meaty £43.5 million profit following a strong share price run. Just days later, Coombs flexed his philanthropic muscles too by gifting 3 million shares to charity.
The month also witnessed a £13.3 million-plus share sale by Peter Cowgill, executive chairman of JD Sports Fashion (JD.). Widely credited as the architect of the trainers-to-tracksuits seller’s meteoric rise, Cowgill cashed in by selling (5 June) 1,985,000 shares in the retailer at 671.77p.
On 25 May, retiring Ceres Power (CWR:AIM) chairman Alan Aubrey offloaded 12.25 million shares at 425p, raking in more than £52 million in a single trade.
HUNTING IN PACKS
Screening for share purchases by more than one director is another interesting feature for investors to track. Over the past three months, the list of companies that have seen pack trades, namely dealings by two or more directors, includes Pearson (PSON), which has seen six director ‘buys’ to one ‘sell’.
Hot on its heels is FTSE 100 healthcare colossus GlaxoSmithKline (GSK), the drugs giant whose world class vaccines division is a key tenet of the bull case, which has seen seven director purchases versus zero disposals.
Elsewhere, directors have been out in force at communications company BT (BT.A), where there have been nine ‘buys’ and no ‘sells’.