Careful following contrarians

Piggybacking directors who support their company's shares is not an infallible way to make money.

But when seven out of a 10-member board put up their own cash after their scrip has copped a hiding with the selling stick, it's maybe wise to have a good look at the stock.

Newcrest Mining was a candidate for such consideration earlier this month.

There's no need to recite too much history; there was news of a restructuring and a kerfuffle over exactly what various research analysts were told by Newcrest.

The share price fell from $15.68 to as low as $9.07.

Around that time, chairman Donald Mercer, managing director Gregory Robinson and non-executive directors such as Richard Knight, Vincent Gauci, Philip Aiken, Richard Lee and the scuba-diving John Menzies Spark, all opened their wallets.

Collectively they spent close to $700,000 and their average price was $9.77.

So, how did this band of contrarians fare?

Well, the shares closed on Friday at $12.41 - a useful 27 per cent return in quick time.

But one month or so earlier, three of them - Mercer, Robinson and Gauci - paid between $14.51 and $17.50 a share for more than $430,000 of stock; which goes to prove that following multi-director buying can also prove costly.

Meanwhile, it was lean pickings on the directors' trades front this week.

Overall turnover slumped from an already low $1.9 million to under $900,000 and the split was $450,569 to $523,194 in favour of directors doing some buying.

Resource counters - largely of the penny-dreadful variety - made up almost the entire table.

Colin Carson, an executive director of Perseus Mining, which has goldmining interests in Ghana, moved fast. The scrip dipped from 66¢ to 47¢ and he snapped up 200,000 shares at 49¢ apiece. The shares closed the week at 59¢.