Directors have been buying big-time at Shire (LSE: SHP), Greene King (LSE: GNK) and Paypoint (LSE: PAY). Should you follow their lead, and load up on shares of these three companies?
Shire
The top brass at FTSE 100 pharma firm Shire have been buying with a vengeance since the company released its annual results last Thursday. As the table below shows, we’ve seen purchases by the chief executive and chairman, a below-board-level manager, or ‘person discharging managerial responsibility’ (PDMR), and four non-executive directors.
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No. of shares/ADSs* |
Price per share |
Total investment |
|
Flemming Ornskov (chief executive) |
1,300* 1,300* |
$160.30 $154.12 |
$208,390 $200,356 |
|
Susan Kilsby (chairman) |
1,600* |
$158.4134 |
$253,461 |
|
Bill Mordan (PDMR) |
1,000* |
$154.12 |
$154,120 |
|
Steven Gillis (non-exec) |
300* |
$154.7699 |
$46,431 |
|
Bill Burns (non-exec) |
1,250 |
£35.6310 |
£44,539 |
|
Olivier Bohuon (non-exec) |
1,000 |
£35.5212 |
£35,521 |
|
Anne Minto (non-exec) |
280 |
£35.60 |
£9,968 |
* American Depository Shares (ADSs) are equal to three ordinary shares.
Shire’s agreement to buy US rare disease specialist Baxalta for $32bn hasn’t met with the approval of all shareholders, and the Footsie firm’s shares have fallen by more than a third since the deal was proposed last August.
However, chief executive Flemming Ornskov is adamant that combining with Baxalta to create the global leader in the highly profitable niche of treating rare diseases is a compelling proposition for Shire. And he and other board members are certainly putting their money where their mouths are.
Most of their buys were at a price below £36 (or the ADS dollar equivalent). The shares are now up above £37, but still look attractively-valued at 15.5 times last year’s earnings, if growth from the Baxalta deal lives up to Mr Ornskov’s expectations.
Greene King
Philip Yea has a blue-chip CV that includes roles as finance director of Diageo, chief executive of 3i Group and senior independent director of Vodafone. He joined the board of FTSE 250 brewer and pubs operator Greene King on 2 February and will take over from retiring chairman Tim Bridge on 2 May.
Mr Yea was barely through the boardroom door when he made a maiden purchase of Greene King shares last Thursday, the day after the company released an upbeat trading statement. He splashed out £257,694 to buy 30,000 shares at 858.98p a pop.
The trading statement said management’s expectations for the year ending 30 April are unchanged, and I can understand why Mr Yea was so keen to open his wallet, with Greene King trading on an undemanding 13 times forecast earnings.
Paypoint
The UK’s leading payment network Paypoint released a trading update on 28 January in which it said that progress had been partially offset by a few minor hiccups. As the shares went into decline, directors began to buy, investing a combined total of over £230,000.
Chairman Nicholas Wiles was first out of the blocks, purchasing 10,000 shares at 797p a pop on 29 January. Non-exec Giles Kerr bought cheaper on 5 February: 7,500 shares at 779p. Fellow non-execs Neil Carson and Gill Barr did even better by waiting until last week, snapping up 10,000 shares at 738p, in Mr Carson’s case, and 2,595 at 728p, in Miss Barr’s case.
Paypoint’s shares have recovered somewhat to 741.5p at Tuesday’s close, and the valuation of 13.5 times forecast earnings for the year ending 31 March looks attractive, as strong growth is pencilled-in for fiscal 2017.
