Decided to buy a teaspoon of EMG (Man Group) today due to the latest goings-on.
EMG is an asset manager that’s done appallingly badly lately. Over 5 years, share price is down 86%. Nasty.
I’ve talked about this before, but as the financial disasters of 2008 were taking hold, Motley Fool posters were explaining the EMG offered good value. Some of those posters appeared to be very experienced investors – with knowledge of the hedge fund industry, even. One theory was that a big fund of theirs was trend-following, so it should make money in both up and down markets. Nice idea, but the problem was that the markets were too volatile – meaning that the fund suffered from a whiplash effect – a jump on the trend, only to find the trend reverse.
So, all-in-all, an investor disaster, even from seemingly knowledgeable investors. It is a salutory lesson that no matter how much you know, and how confident you are, you can always be wrong. It pays to diversify.
What’s my big idea, then? Well, there’s been some director buying lately. That’s not a foolproof sign, of course. Directors don’t know necessarily know the future better than anyone else. In Sep 2011 there was substantial director buying. Earlier this month, a director bought £250k of shares at 82p.
What’s also interesting is that the company is now embarking on a scheme of arrangement. This should jiggle the reserves so that they can pay dividends out of distributable reserves. Scanning through the prospectus, it looks like they will also take the opportunity for a big bath. Part of the rationale for the scheme is “to absorb the impact of any future requirement to recognise impairments in the carrying value of investments in subsidiaries”. This should gussy-up the financial statements in future.
I reckon the shares could double from here. We shall see.