When replicated directors’ dealings trade at negative investment returns – Time for panic-mode?
September 11, 2024
On September 10, 2024, BMW announced a recall of 1.5 million vehicles due to a brake issue supplied by Continental. As a result, the share prices of both companies dropped sharply.1 Investors who bought these stocks based on the directors’ dealings three months ago may wonder: Is it time to get into panic-mode and sell-off the shares? To answer this question, BOSS STOCKS analyzed 203 directors’ dealings in the German DAX between January 2022 and August 2023. These managers’ transactions reached a low at least 10% below the purchase price within twelve months. We were particularly interested in exploring how many of these stocks could turn the losses into a profit within the next year.
Negative investment returns are no reason to get into panic-mode due to strong recoveries within the next year
- 82% of the directors’ dealings turned around to create positive investment returns of up to 66% within twelve months. 18% of managers’ transactions could not turn the losses into a profit but all of them reduced the losses.
- BMW: In September 2022, BMW shares traded 13% below the purchase prices of May 2022. In the following months, the share price recovered and yielded investment returns of 45% by mid-June 2023. The pattern repeated itself with a decline of 15% by October 2023 versus the purchase prices of June 2023 to then yield investment returns of 12% by April 2024.2
- Continental: In September 2022, Continental shares traded 38% below the purchase prices of June 2022. In the following months, the share price recovered and yielded investment returns of 10% by March 2023. The pattern repeated itself with a decline of 13% by October 2023 versus the purchase prices of June 2023 to then yield investment returns of 17% by early January 2024.2
Discover the directors’ dealings for strong investment returns with BOSS STOCKS
When replicated directors’ dealings trade at negative investment returns, there is no need to get into panic-mode as the results indicate that four out of five turn profitable within a year. BOSS STOCKS helps you replicate such directors’ dealings. Free sign up to test the product before market launch.