Insider: Share slump triggers heavy buying

Paragon punter piles in

Shares in specialist lender The Paragon Group of Companies had plunged by 35% since early October when the chancellor announced a new additional stamp duty rate of 3% on buyers' second homes from this April.

It was aimed at protecting the first-time buyer market from buy-to-let landlords and multiple home owners, but it had a devastating impact on the value of buy-to-let lenders like Paragon.

Having fallen to their lowest since June 2013 last week, Paragon's share price has made a minor recovery, but non-executive director Alan Fletcher clearly thinks they're still cheap.

On the board since 2009, Fletcher has just paid £75,000 for 22,930 shares at 327p each, taking his stake in the business up to 82,930, worth over £264,000 at current prices.

And Fletcher has made some good calls in the past. By luck or good judgement, he sold 65,000 shares at around 433p in February 2015, not far off the high. He's kept his powder dry up until now.

This purchase comes on the back of better-than expected first quarter results. Paragon said this week it grew underlying operating profit by 14% to £35.2 million in the three months to December. Broker Barclays had pencilled in £33.8 million. Underlying pre-tax profit of £33.9 million also eased past estimates.

Barclays also liked the Common Equity Tier 1 (CET1) capital ratio of 16.8% and leverage ratio of 7%. It welcomed progress on delivering the £50 million share buy-back flagged in November, with £11.6 million already achieved. It thinks the shares are worth 375p.

Purplebricks leaders build stakes

There's been insider share buying at Purplebricks on the day of its interim results, published just six weeks after the online estate agency floated on AIM.

Selling £25 million of shares through its IPO, at 100p each, valued the business at £240 million. That raised eyebrows, and with stockmarkets plunging, the price had sunk to 72p by last week.

That was a massive hit to paper profits for Neil Woodford, whose fund owns 70 million Purplebricks shares, or 29% of the company. But he'll have less of a grimace on his face after a recovery to 90p over the past few days.

Despite losing £6.4 million in the six months ended 31 October, as sales and marketing costs swelled to £6.6 million, investors liked a jump in revenue from £0.8 million to £7.2 million and gross profit of £4.1 million. Online market share grew from 43% in April to 60%, making it the fourth largest estate agent within 18 months of launch. It also had net cash of £9.7 million.

And both Purplebricks chief executive Michael Bruce and chairman Paul Pindar think they've spotted a pricing anomaly. Already owning huge stakes in the business, they've coughed up not far short of half-a-million pounds for more.

Bruce bought an extra 320,000 at 78p, taking his interest over 41.2 million shares, or 17.2% of the firm. Pindar's purchase of 300,000 at 78.16p means he now owns more than 11 million Purplebricks shares, or 4.6% of the company.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.