Share Dealings

This week we put the private dealings of Australia’s directors under the microscope and see plenty of directors happy to back themselves, even when the company may be experiencing some turbulence. Separately, we take a look at what some of the world’s biggest fund managers are doing down under and take a closer look at the volatile retail sector.
In the light of the $1.6 billion takeover deal from OneSteel (OST) to acquire Smorgon Steel (SSX), it is interesting to note that the deputy chairman of BlueScope Steel, Ronald McNeilly, has been making purchases in his own company to the tune of $25,000. And McNeilly isn’t the only chairman to be making trades in his own company.

Separately, the chairman of AMP (AMP), Peter Mason, has also demonstrated faith in his own company by purchasing 20,000 shares in AMP (AMP) for the princely sum of $171,000. The purchase was conducted on market and announced to the ASX on June 22. In another trade executed by a company chairman, John Ingram of Nick Scali (NCK) picked up $94,000 worth of stock in the furniture retailing outfit.

As the share price of iiNet (IIN) plummeted we examined a number of transactions that involved iiNet on June 5. In looking at the director dealings that were made over the last week we can see that one person who has quite a bit of faith in the company is its managing director, Michael Malone. On June 19 an announcement was made to the ASX that he had purchased $4.3 million worth of his own stock. Could there be a turnaround on the cards the Perth-based ISP? Nothing indicates a company turnaround better than a director sinking his hard-earned back into his own company.

Andrew McDonald of Cytopia is another director who one would expect to have a good handle on the company’s prospects. As the firm’s former chief financial officer, now chief executive, he would have played an important role in the $287 million deal with global pharmaceutical company Novartis. Announced to the ASX on June 20, McDonald laid out just over $45,000 for Cytopia stock.

One of the resource stocks to be hit hardest by the recent correction was Hardman Resources (HDR). The stock slipped from $2.27 to $1.46 in the period between late May and early June. Non-executive director John Conlin announced to the ASX on June 19 that he had made an on-market purchase of stock in Hardman Resources (HDR) totaling $38,495.

Giants of funds management down under

Leading US institutional investor JP Morgan Chase has swept into the local market hunting for bargain resource stocks. In a series of announcements made to the ASX on June 23 it was revealed that JP Morgan has spent about $20 million on mid-cap mining stocks: $5.2 million on Lafayette Mining (LAF); $7.6 million on Bendigo Mining (BDG); and $7.1 million on Sino Gold (SGX).

Separately, local fund manager Perpetual has also been on a shopping spree. Apart from announcing on June 21 that it was reducing its holding in Bridgestone from 6.6% to 5.5%, the $2.8 billion fund manager has been even more active in making acquisitions. On June 20, it announced that it was increasing its holding in junior telco SP Telemedia from 11% to 12.3% at a cost of $35 million. The following day Perpetual announced that it increased its holding in good group Goodman Fielder at a cost of $27 million.

But that’s not all. Perpetual has also demonstrated some faith in the retail sector by making a number of other purchases. In the same week that both Nick Scali (NCK) and Oroton (ORL) delivered profit warnings, Perpetual made investments in each company. In the case of Oroton (ORL), it invested $2.3 million, taking its holding in the luxury goods retailer (the subject of a failed take over bid last year) from 10.6% to 14.3%.

Perpetual isn’t the only fund manager interested in Nick Scali (NCK) either. On June 22, Paradice Investment Management announced it had purchased $2.9 million worth of stock, taking its overall holding to 7.2%. And it would of course be remiss not mention the retail story of the week, Colorado (CDO), which shot from $3.45 on June 19 to $4.42 on June 24. ARH Investments announced to the ASX that it had acquired $17 million worth of stock between March 24 and June 19, before taking the plunge and purchasing another $33 million worth of scrip on June 20 and June 21.

In previous weeks we have paid some attention to how the fund managers were approaching tech stocks and this week is no exception. Fidelity International has gone short in Seek (SEK), offloading stock totalling $27 million. At the same time, it has gone long in Computershare (CPU), sinking $46 million in the company. The highly regarded Peter Lynch remains a research consultant at Fidelity International, which is one of the biggest fund managers in the business.