Gartmore’s Gervais Williams shrewdly took profits in Costain Group weeks before shares tumbled 19% in a day, but has still been hit by a significant stake.
The construction firm (COST) announced that it would have to write down over £40 million because of contract disputes that have turned sour and other operational problems.
Shares tumbled 19% on the news to 48.5p on 18 December. The fall will have hit Gartmore, which across its unit trusts and investment trusts, owns close to 6.4 million shares (around 1.8% of the company), according to Citywire sources.
Nevertheless, Williams was actively selling down his stake around the end of November, offloading over 72,000 shares in the Gartmore UK and Irish Smaller Companies fund (Gartmore UK & Irish Small Companies) alone.
Williams sold out primarily because he thought the valuation was overstretched. Citywire believes he sold his stake at about 62p.
Williams said: ‘Fortunately, we have been cutting our holding because of valuation. Obviously we have got an issue with this stock, but I think the share price has overreacted and perhaps the announcement has not been worded precisely enough.’
Williams believes the company does have some strength that is now not priced in, but is grateful nonetheless for a level of profit taking ahead of the announcement.
Williams led the sale of the stock at Gartmore. Sources indicate that his fellow manager Chris Burvill did not sell out the stake he holds in the Gartmore Cautious Managed fund. (Gartmore Cautious Managed Acc)
Burvill has a stake of 1,049,637 shares and is not thought to have made any sales since July 2005.
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