Directors' dealings

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4. Size of transaction

1. Size matters

   The more a director is willing to spend on shares in their own company, the more confidence it shows in the future share performance. Small scale trading, purchases or sales under £15,000 for instance, should be regarded as relatively unimportant.

2. Size is comparative, not absolute

   Sales or purchases have to be seen in the context of the directors' current holdings. A purchase of 50,000 shares at 100p is a big splash of money, but if that director already holds five million shares in the company the change in his holding is negligible. Transactions must be relevant to the director in question and as a general rule, transactions which amount to 10% of the resultant holding can be seen as meaningful.

If you want to find out what holding a director has before a transaction, you can find the information in a number of printed directories including:

Really Essential Financial Statistics (REFS) published monthly by Hemmington Scott. For each quoted company, REFS provides details of:

• Shareholders who own 3% or more of the ordinary share capital
• Directors holdings, expressed either in % terms or absolute figures
• Date of directors' purchase or sale, volume transacted, price, net holding

Inside Track, a monthly newsletter that provides details of Directors' purchases and sales worth £15,000 or more than 10% of their holding, recommends 4 shares which it considers 'buys' and follows up on previous recommendations.

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