Large shareholders selling up?

29th Mar '17 by dfs12

8 comments 8726 reads

I'm always looking for hints to determine where we are in the cycle of share price swings. Are we in bargain basement territory with lots of beaten up shares (that we should be buying)? Or are we in the land of irrational exuberance with overpriced stocks (that we should be selling)? It's not usually a clear cut process and many people would say that you're better off not trying to judge the market. Others prefer waiting for clear cut markers that rely on very long term movements - but with those you risk being a bit late to the trend (either up or down).

In the last week 4 shares that I hold have been hit by significant falls as a result of major shareholders selling down their holdings. As far as I can remember I've never had this problem before - so four times in such a short space of time is ringing alarm bells.

My four hits:

Clarkson (LON:CKN) - 21st March
1.23 million shares representing approximately 4.1 per cent of the issued share capital

Watkin Jones (LON:WJG) - 24th March
50 million shares representing approximately 19.7% of the issued share capital

JRP (LON:JRP) - 29th March
Shareholders Sell Over 10% Stake In JRP Group For GBP123.5 Million

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jjis

29th Mar '17

I think the phrase is distribution when the "smart" money, VC's in this case start to offload their stock after a strong run in the market. They also start bringing their investments to the market having bought them cheap and loaded them with debt etc. $XLM was another example of a placing this recently too.

If it helps here is a link to a brief pdf discussing market tops and bottoms and distribution days which relates to days of above average volume in the market generally, rather than stocks individually.

Hope this helps?

jonno

I held WJG but sold at about 153 to crystallise a profit of about 40%. This was before the news of the sale of about 50m shares by the WJG Trust and CFO, so my timing was somewhat fortuitous. My reasons for the sale were that the share was approaching my estimate of fair value, the markets here and in America are close to all time highs and there is a lot of uncertainty and potential for black swan events.

It may be that time will judge my sale to be premature, but I think that there will be opportunities to buy back in at a much lower price once the dust has settled on the recent share sales. I am going to a presentation by WJG this evening and no doubt the recent sales will generate several questions. I continue to like the company and management still have significant holdings; hopefully this evening's presentation will help clarify the reasons for the sale, we shall see.

Best wishes

Jonno

Rusty2

You can add Purplebricks (LON:PURP) to that list, I believe 7.9m shares were sold. I have sold out before following large directors sales such as accesso Technology (LON:ACSO) which was a mistake so I have rather changed my view on that. But there does seem to be a lot of it going on, maybe they are concerned about Brexit?

peterg

Jonno,

I'd be interested to hear about any discussion of the family shares sales at WJG that comes up this evening - I hope you can report back.

I'm not very surprised by the sale, and fairly happy with the way it's been managed. I certainly don't see it as having any negative significance for the likely future performance of WJG. The company is still in the process of undergoing the transition from being a private family owned company to a public listed one. After the IPO the family and trust ended up with a large remaining holding, even though Mark WJ was the only family member still actively involved in the company. I don't think it's any surprise that the rest of the family are happy to divest further. In that I'd think their interests match with those of the company who would probably like a larger free float, and more institutional involvement. If anything I'd interpret the sale now as positive, in that it demonstrates that the company has reached a point where a large block of stock could be sold on to institutions with minimal disruption and at a small discount the current price (and in fact above the price a few weeks ago). So if significant at all it's positive.

Of course the family still owns nearly another 20%. I won't be surprised to see some of those being sold in the future, but hopefully it will happen as smoothly as these have.

Peter

Hi Peter

I will report back on this evening's meeting. Your resume of the situation at WJG seems perfectly logical and all being well I shall re-invest in the near future.

Jonno

dfs12

Thanks for the link. Looks interesting - I'll give it a good read to see if it helps clarify where we are.

Thanks for the info on Purplebricks. With regards large director sells - I've never found them a particularly good indicator of anything either. But I was wondering if the clustering of the timing of these makes them more significant. Time will tell I suppose.

21st Apr '17

Hi Peter

Apologies for this late brief overview of the presentation by Mark WJ that I attended on 29 March, but domestically life has been busy and I am afraid it initially slipped my mind.

As you will no doubt have surmised the recovery in the share price to an all time high tells the story, so this post has in large part been overtaken by the passage of time.

Surprisingly there were only a few questions relating to the share sale despite my anticipation of a more expansive discussion. Mark was I thought a little 'scratchy' in his response and pointed out that he and the CFO retained sizeable holdings and the sale will help increase the shareholder base. He also looked tired, hence perhaps what appeared to be his irritation regarding questions on the share sale. Insofar as trading is concerned it is business as usual as has since been confirmed by the trading update on 3rd April, although he indicated that private rented schemes are likely to feature more prominently in the WJG's future activities.

Best wishes

Jonno

Large shareholders selling up?

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Dfs12

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