Record rise in director share buys

MORE directors are buying shares in their own companies than at any point since the bear market began two-and-a-half years ago. About 500 company bosses snapped up stock in September, 60% more than in August, according to figures compiled by the specialist website DirectorsDeals.com for This is Money.

The bullish wave of buying exceeded the previous high in July when 450 directors were attracted by their own cheap shares in what was then a six-year closing low for the FTSE 100 of 3777 points.

The number of buyers dried up to just 300 in August as the Footsie bounced back but they returned in droves this month as the blue chip index sank to a new low of 3671. 'We are talking record buy to sell ratios in September,' said Michael Tindale of DirectorsDeals.com.

Investors closely watch buying habits of bosses because of their unique insight into the financial health of their businesses. Also, the buy to sell ratio serves as a barometer of confidence in the direction of the market, according to some observers.

Figures from Digitallook.com, a company research website, confirm the surge in confidence. It says buyers outweighed sellers by 10 to one in September compared with a long-term average of 2.25 to 1. 'Buying in September was certainly much stronger than it's been for the last couple of years,' said Andy Yates of Digitallook.

The company said there was a similar wave of buying in the stock market collapse following 11 September, but even then the buyers outweighed sellers only by five to one, half last month's total.

'It doesn't necessarily mean the market will bounce back immediately,' added Yates. 'But if directors are willing to put their own money into the market – and we‘re not talking about options they are merely given – then they've got to think they're going to make money.'

A possible contributor to the upsurge in dealing may have been that many companies reported interim results prior to September and, under City rules, are barred from buying and selling two months before the announcement – the so called 'closed period'.

Among the big spenders were Lord Sterling, chairman of ports and shipping giant P&O – not to be confused with the spun-off P&O Princess cruises business – who splashed out £425,000 on stock.

Directors at house builder Berkley Group went further, spending £752,500 and bosses at Liberty International, which owns London shopping centres and offices, snapped up £283,000-worth of shares.

DirectorDeals also highlights buying at ICM Computer Group as a possible sign of fresh hope for the IT sector. Directors, including chief executive Barry Roberts, fortuitously sold a chunk of shares in the IT company at the peak of the technology bubble for around 950p and have only this week dipped a toe back in, buying £61,200 shares at 127p.

A company spokesman warned not to read between the lines, stressing that directors merely sold because they needed the money for personal reasons back in March 2000 and have had few chances to buy since then due to closed periods for results and buy-out negotiations.

Among the few sellers in September were Vimal and Gillian Khosla who dumped Lastminute.com shares worth £510,000 at 93p. They received the stock in April, then worth around 60p, when Lastminute bought their flights website TravelSelect.com.