Stocks the Rich Executives Are Buying

Put five Fools in a room, ask them how they invest, and you'll likely get five different answers. Some like growth, others value, or small caps, or dividends, or … well, you get the picture.

Yet, while our styles differ, we all want excellent, engaged managers running the companies we own. We like it even more when these managers are also owners -- investors like you and me who, in trying times like these, are willing to buy as others sell. That's why I write this column weekly.

The week's buying
So which rich executives are buying now? Have a look, courtesy of our friends at Form 4 Oracle:

Company

Closing Price 11/13/08

Total Value Purchased

52-Week Return

Corning (NYSE: GLW  )

$9.52

$2,514,975

(59.1%)

Dow Chemical (NYSE: DOW  )

$22.24

$460,000

(43.6%)

General Electric (NYSE: GE  )

$16.86

$1,570,745

(55.2%)

Monster Worldwide (NYSE: MWW  )

$12.44

$97,280

(65.9%)

PACCAR (Nasdaq: PCAR  )

$28.73

$1,873,800

(40.8%)

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

How now, Dow?
Dow Chemical is one of my favorite non-tech companies because of the way that it utilizes technology. Think of it as innovation with a tight fist. Trade journal Computerworld reports that the company's IT leaders ensure that employees stick to its SAP (NYSE: SAP  ) suite for core operations, Lenovo for laptops, and Research In Motion's (Nasdaq: RIMM  ) BlackBerry for smartphones.

Standards create efficiency in the IT world and, for years, Dow has been excellent at producing above-average returns on invested capital. Not recently, though:

Year

ROIC

Trailing 12 months

6.9%

2007

8.5%

2006

10.8%

2005

12.7%

Source: Capital IQ, a division of Standard & Poor's.

Don't read too much into that. Dow grew revenue 13% and earnings 6% in the third quarter. And its dividend now yields 7.6%. For comparison, consider that your classic three-month U.S. Treasury bill yields just -- wait for it -- 0.21%.

For those reasons and more, Foolish colleague Todd Wenning added Dow to the High Yield Portfolio about three weeks ago. He's one of many bullish investors following Dow in our 120,000-strong Motley Fool CAPS community:

Metric

Dow Chemical

CAPS stars (5 max)

*****

Total ratings

1,509

Bullish ratings

1,434

Percent Bulls

95%

Bearish ratings

75

Percent Bears

5%

Bullish pitches

244

Bearish pitches

10

Some of them have been bullish for months. Here's a February pitch from All-Star saxonglass:

I'm not sure people realize the fundamental change that has occurred in [Dow's] business model. Several joint venture companies have been formed and virtually every one will provide [Dow] with distinct advantages relative to raw materials and markets. The Saudi JV provides a stable, low cost supply of petro. The JV in Brazil with a stable raw material for many plastic products. [Dow] should be less cyclical than in the past, and with the $1.68 dividend, (4% yield) a dividend reinvestment policy should provide 10% annual growth over the next few years with little risk.

Perhaps short-term investors fail to see the advantages, saxonglass, but not the insiders. Five have bought shares since Oct. 27. CEO Andrew Liveris joined the party on Tuesday when he bought 20,000 shares for an average of $23.00 each.

Dow has more than 3,000 products. Many of them are essential to everyday living. As CAPS investor Gtrinvestor put it last month, "Baby and bathwater taking flying lessons this year drives me toward [Dow] as an outperform. Huge dividend now given the depressed stock price."

Indeed, sir. Liveris and his team are betting on it.

There's your update. See you back here next week when we dig through more insider filings in search of the next home run stock.

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Fool contributor Tim Beyers is getting torched in CAPS currently. Thankfully, he's doing better than that as an analyst for Rule Breakers. Get access to all of Tim's Foolish writings here.

Tim didn't own shares in any of the stocks mentioned in this article at the time of publication. Dow Chemical is an Income Investor recommendation. PACCAR is a Stock Advisor selection. The Motley Fool's disclosure policy knew a rich executive once. But she never bought anything.


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