FTSE in-depth: ARM directors head for exit

 

Is ARM Holdings, one of the leading lights of Britain's vibrant technology sector, overbought?

Trading Board, Stock Market

Waiting game: Traders want to see the outcome of the spending review

Should investors take profit now, in the belief that the chip designer's stock is only heading in one direction - down?

Many investors clearly think so - including, it seems, several of the Cambridge-based company's own directors.

On September 10, ARM's chief technology officer Mike Muller raked in more than £1.2m after dumping 300,000 shares at 402.37p each.

Three days later Young Sohn, a non-executive director, sold 25,000 American depositary receipts at $18.72 apiece, pocketing £300,000.

In total over the past week a halfdozen ARM executives and outside directors have sold 725,000 shares, collectively earning just shy of £3m.

Such profit-taking is rarely indicative of a company expecting an immediate share boost, either through internal growth or the prospect of a bid from a leading rival.

ARM, whose designs are used in more than 95% of the world's mobile phones, has long been in the acquisition spotlight. Rumours of a pending all-cash tender from the likes of Apple, Intel or Samsung refuse to go away, even though management is fiercely determined to defend its virtue and maintain its independence - at least for now.

Investors and analysts are finally, and rather grudgingly, reaching the same conclusion. ARM's shares inched down 2.2p to 386.9p, after shedding more than 4% on Tuesday.

In a research paper, Execution Noble analyst Vijay Anand noted that while ARM remained 'exceptionally placed to outperform [the] semiconductor industry', the current price remained 'hard to justify'.

Anand advises investors to sell, arguing that ARM share are worth just 300p a piece.

Two other leading British technology firms long viewed as potential acquisition candidates, Autonomy and Sage Group, had rather better days. Autonomy saw its stock end up 15p at 1810p, while Sage closed 1.3p higher at 255.3p.

Elsewhere, the Prudential's comedy rollercoaster year continues. After trying and failing to buy the Asian arm of AIG earlier this year for £22.6bn, it has now seen its role switch from hunter to prey.

Ongoing whispers of an imminent takeover attempt by a group of mysterious Chinese investors, including Go Guangchang, the billionaire founder-chairman of privately run conglomerate Fosun, continue to buoy Pru shares.

Two leading institutions appear to be buying into the idea. Legal & General boosted its stake to 4% from 3% after buying £26m worth of Prudential stock, while BlackRock spent £5m raising its holding to around 5%. Shares in the Pru, so embattled since the failure of its AIG deal, rose by more than 1%, ending up 6.5p at 628p.

Overall it was another fairly lacklustre trading day with a 'derisory' level of stock turnover (around 747m shares changed hands), according to David Buik of broker BGC Partners. The Footsie closed down 11.85 points to 5,555.56p, its second straight day of virtually flat trading.

What positive activity existed was led by fashion retailer Next, whose chief executive Lord Wolfson dismissed the threat of a double dip recession. Next led the list of market risers, ending up 136p at 2176p.

Rival Marks & Spencer enjoyed a solid day riding on Next's coat tails, closing 12.6p higher at 379.7p. Kingfisher, another leading retailer set to roll out half-year figures today, saw its shares inch up 7.2p at 219p.

Debenhams, another retailer set to benefit if consumer spending locates its mojo in the months ahead, saw its shares close down 0.9p at 66.4p, despite being upgraded to buy from hold by brokerage Seymour Pierce.

Mining giants Rio Tinto and BHP Billiton saw their shares edge down after both requested a delay in the approval of their Australian iron ore joint venture. Rio ended off 49.5p at 3573.5p, while BHP - which may be tempted to raise its £25bn hostile bid for Canada's PotashCorp if the Rio alliance falls through - closed down 18p at 1963.5p.

Mining rival Xstrata fell 10p to 1160p while Kazakhmys ended off 8p at 1356p. Eurasian Natural Resources Corporation fell 18.5p to

866.5p. BP endured yet another worrisome trading session, ending off 11.1p at 404.15p. Desire Petroleum jumped 4.75p to 118.5p after Evolution Securities initiated coverage on the energy independent with a buy rating and a 136p target price.

Elsewhere, Oakley Capital saw its shares jump 9.5p to 123 .5p after selling Host Europe, a German Internet hosting business, for £222m - the first disposal by the listed private equity house since its formation in 2007.

South Atlantic energy explorer Falklands Oil & Gas has had a mixed start to life with one major oil strike, two dry wells, and a non-commercial gas discovery. Yet Evolution Securities likes it - a lot. It initiated coverage on FOGL at 248p, a hefty premium to the company's stock (up 1.25p at 114.25p). Evolution analyst David Farrell highlighted FOGL's particularly 'attractive valuation'.