Reading the directors' deals in their companies shares

If you are studying shares and looking to invest, you will quickly come to realise that the problem is too frequently having too much information to hand, rather than too little.

This means that you need to focus in on the key information to study, and working out what that is is no easy feat.

One piece of data that is of interest to many investors is to look at the directors deals in company shares. The reason this seems a good idea is fairly intuitive and obvious: who knows a company better than those who help to run it and are involved in setting strategy, goals and so on - surely they have the best idea of the future prospects of the company.

On that thought, when they buy it is seen as a good sign of good times ahead, whilst if directors sell it could look like they are getting out while the share price is good as they expect it to fall - hardly encouraging for a would-be investor.

However you do of course need to be careful, because there could be non-financial reasons why the directors are buying or selling shares: for instance if they sell it may be nothing to do with confidence in the company but they've simply brought a nice new country pad and need to get some cash to pay for it rather than get a massive mortgage!

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Reading the directors' deals in their companies shares

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