Careful following contrarians

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

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¢.

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