Insider: Three shares going cheap

I wrote this week about profit warnings and red flags to watch for. Many of the results disappointments over the past few months have been quite predictable, and there's reason to suspect a number of them have more shocks in the locker.

But at least it's nice to see management showing faith in their businesses. In the past few days, chiefs at Next and Braemar Shipping have put their own money on the line, and Sage top brass have decided the recent collapse in its share price has gone too far.

Next banker is buying

We already know the Next board has been actively buying shares since its ugly 4 January warning.

Non-exec Steve Barber waited a couple of days to gather together the £102,000 needed to dump 2,500 Next shares in his SIPP at £41.01. The following week, co-worker Francis Salway spent almost £51,000 on 1,250 shares at £40.50.

Good things come to those who wait, however, and Jonathan Bewes, the former Merrill Lynch banker who joined the board in October, has this week acquired a stake in Next at a knockdown price.

His 1,750 shares cost just £67,000, having paid £38.82 apiece, a near-four-year low. Given the qualified accountant has spent 25 years as a top-level banker, he's clearly savvy which should give shareholders some comfort.

However, Next is not firing currently, and the high street bellwether admits profits will keep falling. The weak pound will also force Next, already under threat from rising inflation and anticipated consumer squeeze, to raise prices by 5%.

One must hope this isn't a case of catching a falling knife.

Bosses refloat Braemar Shipping

Braemar Shipping's technical division has run into trouble. It's no surprise given it did stacks of work for the now-struggling oil & gas industry. That triggered a major profits warning, plunging the shares back to prices not seen since the financial crisis and global recession in 2009.

Broker Stockdale downgraded earnings per share (EPS) estimates for the year to February 2018 by 32% to 20.1p. However, even after the share price collapse, the firm still trades on a price/earnings (PE) ratio of almost 15.

Despite a strong balance sheet, with net assets of £101 million, the dividend was disappointing. Despite that, there's still a prospective yield of 6%.

At 249p, the shares are off their worst levels, and management thinks we're near the trough.

Chief executive James Kidwell and non-executive director Jurgen Breuer wasted little time, buying 15,853 and 20,000 Braemar shares respectively, both at 249p. A day later, Breuer's wife snapped up another 20,000 shares at 241p.

Even if the shares struggle, the pair will trouser a tidy dividend, assuming Stockdale's estimates for a 15p a share payout in 2018 are right.

There's something else interesting here, though. Kevin Gorman, who runs Braemar's Cory Brothers Shipping Agency business, sold 15,356 Braemar shares just five days before the profits warning at 306p. Great timing, or what?

Bargain-hunting at Sage

It would have cost you as much as 761p to buy Sage shares last October. On Thursday, they could be had for less than 600p, although you'd have had to be quick.

Chief executive Stephen Kelly and chairman Donald Brydon were. Kelly paid £149,000 for 25,000 shares in the accountancy software giant at 596.5p, a post-referendum low. Brydon got his 10,000 shares for 599.9p.

Clearly, the market shares their optimism. Losses following Thursday's largely in-line first-quarter trading update are unwinding quickly. At 611p, currently, both have made a nice paper profit already. But they should do better.

Sage had already warned that the start of 2017 would be slower, and the US payments business did peg underlying growth at 5.1% for the three months. A year earlier, it had been 6.6%, and 6% over the whole 12 months. However, strip out the up-for-sale US payments operation it was 5.9%.

David Toms, an analyst at Numis Securities, rates the shares 'add' with 765p price target.

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.