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21 Oct | Director Dealings

There are very few sure things in the world of investment but there are certainly some investment strategies available that can tilt the odds of success in the investor’s favour.

Today, if we choose, we can literally drown in a sea of online financial information – from websites to forums, to social media. It’s not so much a case of how to find financial information, rather how to sort it and filter it; how to pan out the information gold and flush away the clay.

Thanks to the wonderful world of market regulation, there is one rather sparkly bit of information we have available to us on any share we’re considering trading; director dealings.

Just as there’s often a fine line between tax minimisation and tax avoidance, I’m guessing it can be gossamer thin between insider trading and director dealing. But on which side of the legal line an individual director’s trade falls, is of no consequence to investors – let’s leave all of that in the hands of the regulators.

No, what we’re interested in is the investment decisions being made by those in the know – the directors, company officers and major shareholders. Those who are present in the boardrooms when the big company decisions are being made. Those who are making those decisions.

Looked at in isolation, director dealings can be a little misleading. I mean, new yachts don’t grow on trees you know. Just because a director sells of a portion of their company holdings doesn’t mean said company is heading for the wall, he or she may be just freeing up a little spending money.

On the flip side, directors may buy for a number of reasons but underlying that decision there is at the very least usually a confidence in the direction the company is heading.

But as an element in a sound stock screen, director dealings (especially when multiple directors and major shareholders are acting together or within days of one another) can definitely be used in adding weight to any investment case.

We tend to keep up to date with director dealings over at Direct Look.

At the time of writing Stockopedia were talking about adding an InsiderRank element to there already wonderful package that would track recent director dealings. Take Stockopedia for a test-drive with a 14 day free trial and see for yourself.

Thanks again for dropping by.

Paul
rsvp@investorsoiree.co.uk