Friday, December 29, 2006

Directors buying and selling close to announcements

The Sydney Morning Herald reported today that gold miner Troy Resources Limited (ASX:TRY) has had three directors trade in its shares less than five weeks before its past three profit results were released.

Troy Resources Ltd director, John Dow, acquired 20,000 shares three weeks before the company announced a doubling of net profit to a record $A16m for 2005-06 while Troy Resources Ltd director, Philip Naylor, sold 17,776 shares less than four weeks before the miner and explorer reported a 36% decline in revenue and a 38% fall in profits for 2004-05.

There were no significant share price movements after the announcements, indicating that they did not contain information that surprised the market, but the trades show that some companies have accommodating share trading policies. The Australian Institute of Company Directors says there are important legal and reputational reasons for companies to maintain sound share trading policies.

The above is a good reason why director buying is something you should be looking for when purchasing a share. You always need to question a stock where the directors are selling out of it especially if it is coming up to a reporting period.

Good Luck investing.

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