Companies that have recently released half-year results have come out of their “close period”, meaning directors are free to trade in the shares again. I haven’t seen too much buying among the FTSE 100 blue-chip elite, but Royal Dutch Shell (LSE: RDSB) and ARM Holdings (LSE: ARM) are notable exceptions.
Is now the perfect time to follow the lead of directors, and snap up shares in these two firms?
Royal Dutch Shell
Charles Holliday became Shell’s chairman in May this year, having previously served as a non-executive director since September 2010.
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In November 2010, Mr Holliday bought 10,000 ADRs (American Depository Receipts). Each ADR represents two shares. He made no further purchases until November 2014, when he bought a further 5,000 ADRs, as the falling oil price sent Shell’s shares down.
Recently, the shares have hit multi-year lows. Shell released its half-year results last Wednesday, and Mr Holliday lost no time in wading in to buy more. On Thursday, he purchased 10,000 ADRs in three trades at an average price of $58.67 for a total outlay of $586,743 — equivalent to around £373,000 at 1,865p a share.
On Tuesday this week, non-executive director Linda Stuntz also decided it was time to buy — for the first time since 2012. She added to her existing 4,200 ADR holding with a 2,000 purchase, buying at $57.71 at a cost of $115,420 (around £74,000 at 1,850p a share).
Shell’s shares are on offer today at about the level these directors splashed out. And I have to say they do look good value on a forward price-to-earnings ratio of 14 with a prospective dividend yield of 6.5%.
Shell acknowledges that the current slump in the oil price “could last for several years”. However, the board is confident that job cuts and a hefty reduction in capital expenditure, through abandoning or delaying some projects, can see it through a “prolonged downturn” in crude prices.
Importantly, Shell is confident that it’s proposed takeover of BG Group, which is moving closer to completion, is a good deal even in a low-price environment. Chief executive Ben van Beurden said recently: “We are not waiting for the $90 dollar cavalry to arrive when we deal with today’s challenges”.
ARM Holdings
World-leading smartphones chip designer ARM released its half-year results a fortnight ago. Last week, chairman Stuart Chambers decided the time was ripe to increase his holding from 30,000 shares to 40,000. He opened his wallet to the tune of £99,499, paying 994.49p a pop for his 10,000 new shares.
ARM reported typically strong results for the half-year, with revenue up 22% and earnings up 31%. However, news from major customer Apple at the same time dampened sentiment towards ARM. The number of iPhones shifted by the US giant was less than analysts had forecast.
Nevertheless, ARM’s future looks bright with growth in other areas adding to that of the mobile devices market. The company reported a record number of processor licences signed in Q2, which it says “reflects the strong demand for ARM’s latest technology across a diverse range of end markets and customers”.
You can buy the shares at 950p, at the time I’m writing, which is getting on for 5% cheaper than Mr Chambers was happy to pay. And, again, I think this stock is good value. The P/E is high — as with most tech companies — at 28x forecast 12-month earnings, but is lower than ARM’s typical rating of 30-odd.
