Directors' Dealings

Cash is indeed king in a market like this, allowing companies security as well as the flexibility to increase market share through selective investment or by making acquisitions.

In the short-term, investors might prefer to have it given to them in dividends, though another, less obvious option — that of companies buying back their own shares, has become an increasingly popular option.

In the past month, the likes of Debenhams, Autonomy, Misys and Kensington have all been buying back large slugs of their own equity. The theory for this is that by reducing the number of shares in issue, the earnings attributable to each remaining share are increased.

Big Yellow buys

But a combination of buybacks and director buying might be seen as a much clearer buy signal, though at self storage firm Big Yellow the two have combined with institutional investors getting shot of their shares. Such a contradictory set of circumstances isn't particularly rare in a market where many institutions are selling shares in order to keep their heads above water.

Following Henderson Global Investors, who sold a few of theirs before Christmas, Aegon UK and Morley Fund Management got rid of all of theirs, around the same time that the company bought back nearly 12 million shares, buttressing the share price at 68p. Meanwhile, chairman David White put more of his money on the line with a 100,000 share purchase at 68p.

But is it worth following him? Well, to be honest, the signs are mixed. But what the company does have in its favour is a very strong-looking balance sheet, with net assets of £70 million at the interim reckoning in September, comparing to a market capitalisation of £68 million. It is also performing quite well, having cut losses by 35 per cent to £650,000 over the previous six months, on turnover raised 86 per cent to £16.4 million.

So, long-term prospects look quite good, although the short-term price drivers look limited, especially with a £2.2 million loss expected to have been racked up over the year to March.

Northgate — spouse buys in

Software services group Northgate Information Solutions is another cash- and asset-rich firm. Indeed, this company has £45.1 million in the war chest after selling a subsidiary, with its businesses also making £1.7 million in pre-tax profits over the previous six months.

Given the group's £64 million market capitalisation, the likelihood of £6-£7 million of pre-tax profits for the year and potentially attractive dividends, it should prove a good investment.

Chief executive Chris Stone's wife is convinced, having picked herself up 100,000 shares at 21p. Katie Potts and her colleagues at the Herald Investment Trust agree too, having raised their stake by 2 million shares.

Crest board takes the cash

Most housebuilders have had reasonably good runs over the past few years, as the housing boom has boomed on and on. However, sector p/e ratings still remain amongst the lowest on the stock market, at around five times prospective earnings. The City doubters remain hardened in their views that it is well deserved, while the companies' own directors express bewilderment about the situation.

It all makes for a rather strange situation, especially when board members actually sell shares rather than buy them, as five did at South East-based Crest Nicholson, after the group's recent final results. Nearly £400,000 was reaped in from their transactions, made from the 'vesting' of share allowances made to them as part of their remuneration.

However, investors should not be too concerned, given that HBOS and Scottish Widows were impressed enough by the results (pre-tax profits raised 34 per cent to £66.3 million), to pick up a combined eight per cent of the group.

A similar situation arose at Domino Printing Sciences, where a pre-tax profit of £15.7 million for the year to October, was not enough to stop managing director Nigel Bond from selling 60,000 shares at £1.28. However, around the same time Aegon UK and Morley increased their respective stakes.