What are the directors doing?

Keep an eye on the directors

Theoretically, company directors should understand their businesses and be able to judge their potential better than those outside the Board room.

There are all sorts of reasons why directors may choose to buy or sell their shares. The general rule of thumb is that it is more productive to follow directors' buying behaviour than their selling, as there can be various reasons behind a sale. For example, directors may be locking in some profit, or raising cash to meet a tax liability or a divorce settlement, whereas they are only likely to buy if they think that the company's shares are likely to rise.

Don't look at directors' deals in isolation. Look at the company's performance figures and check for any corroborating evidence in the news before making a decision to invest. Also, see if groups of directors have been buying or selling their company's shares.

Helpful tips

When you look up an investment on our website, click on 'director deals' to see if they've been dealing in their own company's shares.

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