Big Deals

Downer EDI (DOW) was heavily criticised in the media this week after reporting a $163 million write-off that resulted in a $25 million net loss. It’s been reported that the extent of the loss has been known for some time, even though the company offered a profit forecast in February of $120 million.
Understandably, the market punished the engineering company after the announcement on July 9, as investors headed for the exit. The stock fell from $7.41 to $4.91 before settling at $5.15, a fall of 30%.

On the same day as the announcement, a unit trust associated with managing director Stephen Giles bought 350,000 shares in the company at the average price of $5.17, for a total of $1.8 million. The following day investors thought the stock had been oversold, and it promptly rose 4.8%.

Another astute director’s trade was conducted by non-executive directors of Minara Resources (MRE).

After reaching a low of $1.62 on November 17, 2005, Minara has gone from strength to strength; its shares reached $2.75 at the close of trade on August 10. Between July 28 and August 3, non-executive directors Willy Strothotte and Ivan Glasenberg each bought 486,503 shares for a total of $1.2 million. The purchase averages out to $2.56 a share; the subsequent rise meant their holding rose in value by about 8%, or close to $100,000, in a week.

In institutional dealings this week, well known value investor group Perennial has shown some faith in rubber goods maker Ansell (ANN), which has fallen 29% or $3.33 since May 8. Perennial has been buying sizeable parcels of stock in Ansell from July 28 to August 9, a total of 1.6 million shares at a cost of $13.4 million. In doing so, its holding has risen from 5% to 6%.

DCA Group (DVC) is another stock that has disappointed shareholders since early May. Prior to the May 11 correction, DCA Group had been trading for about $3.80. Since then, it has lost some big overseas tenders and investors have deserted the stock; it closed at $2.31 on August 10. ABN-Amro has announced that between May 1 and August 7 it has bought 24 million Ansell shares for about $75 million, taking its stake to 5.2% and making ABN-Amro a substantial shareholder.

Global funds management group Barclay’s Global Investors has bought up big slices of Australia’s listed property trusts over the past four months. On August 10 the company announced that it had become a substantial shareholder in three stocks: Macquarie Goodman (MGQ), Centro Retail Group (CER) and Rubicon Europe Trust (REU). It paid $484 million for 5.45% of Macquarie Goodman; $46 million for 5.7% of Centro Retail Group; and $13 million for 5.45% of Rubicon Europe Trust. The overall investment, of more than half a billion dollars, is as good a sign as any that Australian listed property trusts are ahead of the pack when it comes to investor returns and innovation.

American-based investment behemoth Capital Group Companies has also invested heavily in Australian stocks over the past four months. It announced to the ASX that it had bought 25 million shares in Macquarie Infrastructure Group (MIG) for about $73 million. Capital’s holding the company has now been lifted from 6% to 7%. Capital has also been quietly building a stake in materials company Boral (BLD) over the same period. Boral has softened by almost 30% since May 11, falling from $9.97 to $7.17 at the close of trade on August 10. The investment included six million shares for about $55 million.

Further to last week's mention of Macquarie Bank's stake in Discovery Nickel (DNL), Colonial First State has announced it is getting on board the speculative mining venture. Colonial has bought six million Discover shares for $1.4 million and now owns 7.2%. After hitting a low of 16¢ on June 20, the stock has shot up to 25.5¢ at the close of trade on August 10.