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Directors snap up shares in post-Brexit downturn

Data shows the spate of buying was the largest in a decade as management took advantage of beaten-up share prices
July 29, 2016

The Brexit-induced slump in the UK stock market sparked the biggest spate of boardroom share buying for a decade in the month after the referendum.

Data compiled by Olivetree Financial for Investors Chronicle sister title FT Money showed directors from FTSE 100 and FTSE 250 companies were quick to swoop on the initial steep falls in markets, but kept buying into July too to bring purchases up to £18.5m. Just six sells have been recorded since the vote at FTSE 100 companies and four within FTSE 250 companies, an important factor given some recent mixed economic data.

Such purchases can be a prized indicator for private investors because if management is backing the company with its own money, it must have strong faith in the prospects for the business.

There were £14m of transactions in the first week after the vote for Brexit and one of the largest purchases was a single trade by the chairman of London-focused housebuilder Berkeley Group (BKG), Tony Pidgley. He snapped up nearly £800,000-worth of shares for his self-invested personal pension (Sipp) and at the time of writing he had already seen a 15 per cent appreciation in their value.

This deal added to the £10.5m put in by FTSE 100 directors in the past month, according to Olivetree, with the biggest buys concentrated in late June and early July.

In total, 69 directors from 23 FTSE 100 companies spanning a wide range of sectors have been buying their own stock. Measured by the numbers of directors buying in, Lloyds Banking (LLOY) tops the table with 21 separate trades, followed by doorstep lender Provident Financial (PFG) with seven trades.

Turning to the more domestically focused FTSE 250, which is edging back towards its pre-Brexit level, director buying in the month following the vote has totalled £8m.

In total, Olivetree has tracked 108 directors from 63 FTSE 250 companies buying their own stock in this period and, unsurprisingly, the sectors hardest hit in the aftermath have seen the most action.

Measured by value, roughly one-third of buys were from FTSE 250 directors in the financial sector (including banks and insurers), one-third were from housing and construction companies, 12 per cent from directors of retail and consumer businesses, and 10 per cent from directors in travel-related industries, such as airlines.

Looking at the timing of the biggest individual transactions from FTSE 250 directors, notable deals in July came from property group St Modwen (SMP) and housing maintenance group HomeServe (HSV), which appear at numbers seven and nine respectively in the top 15 companies for director buying.