Directors' dealings

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1. What are directors' dealings?

Directors' dealings are the purchases and sales made by directors of shares in the publicly quoted companies for which they work.

It is perfectly legal for directors to buy or sell shares in their own company provided certain rules are observed.

The theory is that directors' dealings indicate what the people running the company think about its share price. Put crudely, if the Directors are buying, they think the shares are undervalued; if they are selling, they think the shares are overvalued.

It follows that by doing what the directors do, you will be on the right side of a share price movement.

But of course it's not quite as simple as that . . .

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