Director’s Dealings
“puRCHAsinG in CLuMps CLosE to A CLosEd pERiod, pARtiCuLARLy wHERE A stoCk HAs HAd A LARGE FALL is usuALLy pARtiCuLARLy notEwoRtHy.” Also, look for activity just before the “Closed Period” (the period that no directors / employees can make transactions) and after this time also. Purchasing in clumps close to a closed period, particularly where a stock has had a large fall is usually particularly noteworthy. 5). Don’t allow your own convictions to cloud your judgement. We have all done it. You do some research on a cracking little stock and feel that there a few things you want to investigate further. Lo and behold, a director just purchased some shares – a great sign you say! So you wade in. It is called re-affirmation of the biased belief.
96 | www.financial-spread-betting.com | August 2013
Remember to check the points here regarding the significance of the trade etc. Additionally, if you had reservations but overlooked them when you saw the director dealing, be prepared to reason with yourself and analyse, in a rational manner, the real reason for purchase. A prime example in recent years where people were blindsided on numerous points we relay above was HMV - and look what happened there! Director dealings are certainly worth considering in your analysis. Just beware that, as with most things in life, the devil is in the detail – and that the interpretation of these trades is all part of your analysis jigsaw. Perhaps it may be worth considering a few examples of recent director dealings. We will then monitor these stocks over the coming months to see whether our interpretation is correct!