Executive Decisions

The sells have been coming in thick and fast lately, as directors take advantage of the traditional strong start to the year by small cap and AIM stocks

2005 has, thus far, been dominated by directors offloading significant portions of their holdings. In all, £232.8 million worth of stock has been sold by London's directors in the last three months* against the £98 million that was used to purchase shares. On a 12 month view, nearly £1 billion of shares have been sold by directors (against £386 million bought), an unsurprising statistic considering the vast improvement in the financial health of many listed companies and the general buoyant atmosphere in the market.

Media star sellers

Specialist business information provider Incisive Media is a good example of a healthy company whose executives have taken advantage of rapidly recovering sentiment. Running well-respected publications such as Your Mortgage and Investment Week and looking to launch ever-more products, it recently announced a 49 per cent increase in pre-tax profits to £5.3 million for 2004. After the results, finance director Jamie Campbell-Harris and development director Cris Stibbs exercised 268,700 and 320,700 shares at 30.7p respectively before selling them at 169p each, netting £814,700 between them. If you're in possession of high double-digit share price gains in this company, it might be wise to follow the lead of Messrs Stibbs and Campbell-Harris and top-slice your gains – the shares are sitting at close to a four-year high.

Monitoring the markets

Another media services business that's experiencing good fortunes is Datamonitor. Following a rapid improvement in its business in the past two years (the group first restructured and then proceeded to bolt on acquisitions), the group has moved out of the red and into the black, last reporting a doubling of pre-tax profits to £5.3 million. Pre-tax profits are expected to rise to £6.9 million this year. The last director dealing I noticed was CEO Andrew Gilchrist releasing virtually all his holding, selling 443,000 shares at an average price of 157.75p, leaving him with a mere 25,000 shares.

Retailers crystallise their gains

The retail sector isn't quite as buoyant as media at present, beset as it has been by a slowdown in consumer spending, interest rate worries and UK personal debt concerns.

But, just as in media, there are directors of thriving businesses selling substantial amounts of shares. One of the most high profile transactions of late was at TV shopping channel operator Ideal Shopping Direct, where chief executive Paul Wright and commercial director Valerie Kaye have been busy crystallising gains. These two sold 4.5 million shares between them at 227.5p, netting £10.2 million. Whether you should follow suit is difficult to gauge since Wright and Kaye more than deserve their rewards having brilliantly driven this business forward – it had its pre-tax profit forecast upgraded four times last year.

Body Shop sell-out

The gains at Ideal are small fry compared to the sells by the famous directors of Body Shop International. In February, founders Gordon and Anita Roddick sold two million shares each at 185p, collecting £3.7 million apiece. Just over two weeks later, non-executive director Ronald de Waal sold his entire shareholding, disposing of 9.7 million shares at 199p, gaining a very healthy £19.3 million. Interestingly, Body Shop International was one of the few companies that bucked the high street malaise over the Christmas period. My advice here is simple: follow the leaders and pocket your profits.

(* three months to 15 March)