Directors' dealings

1  2  3  4  5  6  7  8  9  10  11  12  13   

9. Follow the leader

When judging the significance of directors' dealings, it makes sense to look at whether the director has dealt in the past, the number of shares bought or sold and the share price performance after previous transactions.

• If a director has bought in the past and the share price subsequently plummeted, you should be wary about following a new bout of share buying.
• If a director has sold in the past and the share price subsequently soared, it doesn't say much for the reliability of his dealings as an indicator of price.

Note that this applies not just to his record of dealings in the company in which you hold shares, but also his record of dealings in other companies of which he is a director (but in which you may not be a shareholder).

• If he has a record of 'counter-indicating' dealings in other companies, his unreliability factor goes up.
• Conversely, there are directors who have established a reputation for reliably predicting, through their own share purchases and sales, the direction of the share prices of companies on whose boards they sit. They are the ones to watch.

1. What are directors' dealings? 2. Distinction from insider dealing 3. Two premises and a fallacy 4. Size of transaction 5. Who knows best? 6. Safety in numbers 7. Dealings in the context of recent share price 8. The closed period 9. Follow the leader 10. Sales can sometimes be a good sign 11. Playing the percentages 12. Other factors 13. Conclusion

• Beyond the Zulu Principle