Careful following contrarians
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¢.
Frequently Asked Questions about this Article…
Director buying can be a useful signal, but it is not infallible. The article notes a case where Newcrest Mining directors bought shares during a dip and later made a quick gain, yet other director purchases at much higher prices show following directors can also be costly. It’s a reason to take a closer look at a stock, not a standalone buy recommendation.
When Newcrest’s price fell from $15.68 to as low as $9.07, seven of the 10‑member board bought shares, collectively spending close to $700,000 at an average price of $9.77. The stock later closed at $12.41, which amounted to a roughly 27% return in a short period.
According to the article, the directors collectively spent almost $700,000 and their average purchase price was $9.77 per share.
No. The article highlights that three Newcrest directors (Mercer, Robinson and Gauci) had previously paid between $14.51 and $17.50 a share for more than $430,000 of stock, demonstrating that following multi‑director buying can still result in losses depending on timing and price.
Turnover in director trades fell from about $1.9 million to under $900,000. The split was $450,569 to $523,194 in favour of directors doing some buying, indicating net director buying activity in that period.
Colin Carson, an executive director of Perseus Mining, bought 200,000 shares at 49 cents each after the stock dipped from 66 cents to 47 cents. The shares closed the week at 59 cents.
The article suggests caution: resource counters, largely of the penny‑stock variety, dominated recent director trades. Penny resource stocks can be volatile, so director purchases in that segment are not automatically a reliable buy signal for everyday investors.
As the article implies, use director buying as one prompt to 'have a good look' at the company. Check recent news (for example, restructuring or analyst communications like with Newcrest), review the timing and price of the directors’ purchases, and consider overall trading turnover before making decisions.
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