Who's Buying Now?

It's a new week, which means it's time to check the most interesting insider purchases. After reading through numerous filings using insider tracking tool Form 4 Oracle, here are my top five from the past seven days:

The week's buying

Company

Closing Price 6/13/06

Total Value of Stock Purchased

52-Week Change

Chesapeake Energy (NYSE: CHK  )

$27.02

$14,536,785

22%

Dean Foods (NYSE: DF  )

$36.05

$347,750

(11%)

Dendreon (Nasdaq: DNDN  )

$3.99

$60,358

(24%)

NRG Energy (NYSE: NRG  )

$45.50

$467,867

24%

Pegasus Wireless (Nasdaq: PGWC  )

$8.67

$352,400

146%

Sources: Fool.com, Yahoo! Finance, Form 4 Oracle, SEC filings

Faker or breaker?
Dendreon is a mystery. On the one hand, it's a potential Rule Breaker, developing what could be a promising treatment for late-stage prostate cancer. On the other hand, it's a serial cash burner that plans to burn through $100 million this year alone. So, which is it: breaker or faker?

Ask management, and they're likely to vote for the former. And they've got the empty wallets to prove it. On Thursday, chief scientific officer David Urdal, general counsel Richard Hamm, and board member Douglas Watson each bought 5,000 shares of the company.

Interestingly, the buying occurred the day after promising study results were published in the journal of the American Cancer Society. In a phase 2 trial, Dendreon's PROVENGE was combined with Genentech's (NYSE: DNA  ) Avastin drug in an attempt to hinder the advance of what's called androgen-dependent prostate cancer, which can occur in patients that relapse after previously successful surgical or radiological care. The study suggests that PROVENGE and Avastin, when combined, may stunt the growth of cancerous cells by as much as 85%.

It's way too early to conclude that PROVENGE is on its way to becoming a blockbuster. But to borrow from poker parlance, the study gives Dendreon more outs than it previously had. One could be an acquisition by Genentech. That would make sense; biotech buyouts have become all too common. Struggling Merck (NYSE: MRK  ) got in on the game in May, for example.

But even if an acquisition isn't forthcoming, the new study should prove useful. PROVENGE is, after all, the future of Dendreon. If management's buying is any indication, the future looks much brighter this week than it has in a while.

Don't forget Fossil
Watchmaker Fossil could be a study in the limited value of insider buying. When I first profiled the company in these digital pages, the shares were trading for 13% higher than they are today. Lousy earnings have hurt returns.

Certainly, that could change, but there's also no guarantee that Fossil CEO Kosta Kartsotis had it right when he purchased shares. He could be as wrong as an elephant in stretch pants. And so could Pegasus Wireless president Jasper Knabb. A week ago, he bought 40,000 more shares in the company. That makes nearly 750,000 stubs since the dawn of 2006, or roughly 1% of the total shares outstanding, according to Yahoo! Finance.

Normally, I'd consider that to be a pretty impressive endorsement, but there are serious problems with Pegasus, which fellow Fool Brendan Mathews recently covered in detail. The biggest issue, however, is valuation. As Brendan figures it -- and I agree with him -- Pegasus' real value tops out at maybe $69 million. Not exactly within spitting distance of the firm's $593 million market cap, is it?

My point is simple: Insiders may be buying for all the right reasons. They may also be buying on a wing and a prayer. There's no way to tell the difference without doing your own homework.

And that's all for this week. See you back here next Wednesday when we dig through more insider deals in search of the next home run stock.

Get the inside scoop on stocks of all sizes with this related Foolishness:

Merck is aMotley Fool Income Investorrecommendation.

Get all the inside information you need in our collection ofinvesting newsletters. From wallflowerish small caps to swashbuckling Rule Breakers, we've got something for every investor.Get in on the actiontoday. All of our newsletters offer a 30-day risk-free trial. All you have to lose is the prospect of better returns.

Fool contributorTim Beyersusually favors two scoops of ice cream over the inside scoop. Tim didn't own shares in any of the companies mentioned in this story at the time of publication. You can find out what's in his portfolio by checking Tim's Foolprofile. The Motley Fool has an ironcladdisclosure policy.


Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 504686, ~/Articles/ArticleHandler.aspx, 11/24/2014 9:06:55 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement