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 this week.

The week's buying

Company

Closing Price 7/24/07

Total Value Purchased

52-Week Change

American Capital Strategies

(Nasdaq: ACAS  )

$41.44

$2,755,659

14%

Capital Trust

(NYSE: CT  )

$32.90

$28,540,673

(3%)

Hertz Global Holdings

(NYSE: HTZ  )

$22.00

$173,120

39%*

NuStar GP Holdings

(NYSE: NSH  )

$34.25

$10,539,700

66%

Thornburg Mortgage

(NYSE: TMA  )

$21.95

$5,285,482

(9%)

Sources: Fool.com, Yahoo! Finance, Form 4 Oracle, SEC filings.
*
Hertz began trading on November 16, 2006.

Two buys that could still be buys
As investors, we're prone to looking back about as much as we look forward. So today we'll put it in park and check the rearview mirror.

Our subjects? American Capital Strategies and Thornburg Mortgage, two stocks that have starred in this column in months past and which, over the past week, have experienced meaningful insider buying.

As businesses, they're very different. Thornburg is a mortgage financier. American Capital supplies debt financing to corporations. Success has led both firms to sponsor massive dividend payouts -- AmCap yields almost 9% while Thornburg yields more than 12% -- yet the amateur and professional investors following these stocks in Motley Fool CAPS have mixed feelings:

Metric

AmCap

Thornburg

CAPS stars (5 max)

*****

*

Total ratings

932

334

Bullish ratings

907

213

Bull ratio

97.3%

63.8%

Bearish ratings

25

121

Bear ratio

2.7%

36.2%

Bullish pitches

195

56

Bearish pitches

5

19

Data current as of Aug. 8, 2007.

The knock on Thornburg is the same subprime slime that tarred the shares in March. At the time, insiders responded by spending $5.2 million to acquire stock. The shares are off 15% since.

But the decline didn't really begin until mid-July, when fears of a credit crunch sent stocks on a wild ride that has yet to end. Analysts have since been spooked. One from Deutsche Bank Securities recently downgraded Thornburg to "sell" out of fear that it may face the sort of rush to capital that may sink Luminent Mortgage (NYSE: LUM  ) .

Crunch time
What this means, in the simplest terms, is that creditors have become picky. They're demanding that financiers like Thornburg hedge their risks by making available more capital to reimburse them in case a larger-than-expected number of loans go bad. Less available capital means less opportunity to earn returns through new investments.

If that sounds bad, it's because it is. Just remember that we don't really know if creditors are targeting Thornburg. This is, after all, just one analyst downgrade. But in these fearful days, investors often appear willing to take conjecture as fact.

Most investors, that is. The insiders at Thornburg seem far less worried. They've once again spent more than $5 million to acquire company stock for their personal portfolios. All told, executives and board members have committed roughly $21 million to shares since last summer. CEO Garrett Thornburg is responsible for $19 million of that total.

Thornburg may very well face a credit crunch, but its mortgage-backed securities are AAA-rated, indicating a very high degree of quality. Insiders, meanwhile, are putting a considerable portion of their net worth at risk right alongside shareholders'. How do you sell a business like that on nothing more than an unconfirmed report? Answer: You don't.

Put on your rally AmCap
American Capital Strategies has been a bit better to our Income Investor subscribers, up slightly since March. Yet insiders still appear convinced that the stock is cheap. Cheap enough, it seems, to justify spending more than $2 million to acquire shares this week and last.

Once again, CEO Malon Wilkus is the chief buyer. He's added 53,000 shares since last Thursday. What's he see? Probably the same thing that my Foolish colleague Rich Duprey sees. Quoting from Rich's recent profile of AmCap:

I have to agree with the CAPS community that this publicly traded private equity investor is worth serious consideration. Because the mezzanine fund niche is not yet saturated, American Capital Strategies is still able to negotiate its deals from a position of strength. Add in a stable and growing dividend and it looks like an investment that can be hit into the mezzanines. [Emphasis mine.]

What he means is that venture capitalists aren't always the best source for startup financing, especially when those start-ups have already taken some equity financing but need a cash infusion to reach sustainable profitability.

AmCap specializes in providing this sort of capital and, in doing so, has produced better than 15% returns on its investments over the past decade. I see no reason why management won't produce similarly outsized returns for many years to come.

That's all for now. See you back here next week 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 related Foolishness:

Get all the inside information you need from our collection of investing newsletters. From wallflowerish small caps to swashbuckling Rule Breakers, we've got something for every investor. Get in on the action today: All of our newsletters offer a 30-day, risk-free trial.

Fool contributor Tim Beyers, who is ranked 6,868 out of more than 60,000 participants in CAPS, didn't own stock in any of the companies mentioned in this article at the time of publication. Find Tim's portfolio here and his latest blog commentary here. The Motley Fool has a disclosure policy.


Read/Post Comments (0) | Recommend This Article (31)

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: 533593, ~/Articles/ArticleHandler.aspx, 9/16/2014 1:21:54 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