Directors have been splashing the cash at National Grid (LSE: NG) (NYSE: NGG.US), British American Tobacco (LSE: BATS) (NYSE: BTI.US) and Advanced Oncotherapy (LSE: AVO). Should you follow their lead and buy shares in these three companies?
National Grid
Jonathan Dawson joined National Grid as a non-executive director in March 2013. During the summer of that year, he and chairman Peter Gershon made a number of sizeable share purchases. However, no National Grid director has made a significant purchase in the two years since — until last week, that is.
With the company’s shares trading not far off their 52-week low, Mr Dawson decided the time was ripe to splash out £85,200 to buy 10,000 shares at 852p for his wife. Mr Dawson is also a non-exec at Jardine Lloyd Thompson, but has bought no further shares in that company since a modest purchase soon after his appointment in 2012.
National Grid is a solid, defensive business; and you can currently buy the shares at around the same price Mr Dawson paid. The stock appears decent value at this level. The trailing price-to-earnings (P/E) ratio of 14.7 is broadly in line with the FTSE 100’s 14.9, but the dividend yield of 5% is well above the index’s 3.6%.
British American Tobacco
Dimitri Panayotopoulos was appointed a non-executive director of British American Tobacco in February this year. By 21 May, he had accumulated 3,300 shares for an average buy price of 3,633p at a total cost of almost £120,000. Mr Panayotopoulos’s timing wasn’t perfect, because the shares have fallen somewhat since — which has been a cue for more directors to buy.
In the past week, finance director Ben Stevens has purchased a modest £18,278 worth of shares at 3,410p; Cristina Dall’Aglio, a person connected with Human Resources boss Giovanni Giordano (an executive just below Main Board level) has bought £68,380 worth of shares at 3,419p; and non-executive director Savio Kwan, who was appointed in January 2014, has chosen to make his first share purchase: 3,000 at 3,405p for a total outlay of over £120,000.
British American Tobacco is another solid, defensive business; and the shares appear reasonably priced at under 3,420p. The P/E of 16.4 is at a bit of a premium to the FTSE 100, but the yield of 4.3% is comfortably higher than that offered by the index.
Advanced Oncotherapy
Moving from tobacco to the treatment of cancer, and from mature megacaps to speculative smaller stocks, we come to Advanced Oncotherapy.
Advanced Oncotherapy’s team is based at CERN in Geneva and is developing a proprietary proton accelerator called Linac Image Guided Hadron Technology for cancer treatment. The shares of this AIM-listed company, which released its annual results on 3 June, have risen 137% since the start of the year to 9.5p, valuing the business at £128m.
On the day of the results, non-executive director Michael Bradfield pulled £147,150 from his wallet to buy 1,500,000 shares at 9.81p. And, before the end of the week, chief executive Sanjeev Pandya and finance director Nicolas Serandour chipped in with modest purchases of about £20,000 each at 9p a share.
What Advanced Oncotherapy is doing is thoroughly admirable from a human welfare perspective, and the directors are evidently confident of the investment case, too. However, it’s difficult to value the business at this stage of its development: the company is currently loss-making, the prospect of a first unit in Harley Street is over a year away, and first patient treatment is not expected until 2017. For me, Advanced Oncotherapy is one to watch for the time being.