Who's Buying Now?

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

The week's buying


Closing price 10/3/05

52-week change

ITT Educational Services (NYSE: ESI  )



Midway Games (NYSE: MWY  )



Ultralife Batteries (Nasdaq: ULBI  )



Vertical Communications



Westmoreland Coal (AMEX: WLB  )



Sources:, Yahoo! Finance

Hello? Are you still there?
Leading off this week is Vertical Communications, formerly known as Artisoft. Once known as a maker of local area network operating systems and a fierce competitor to Novell and Microsoft (Nasdaq: MSFT  ) , the company now competes with the likes of Cisco (Nasdaq: CSCO  ) and Lucent in making phones that use Internet technology to make calls. But the switch hasn't made much of a difference in terms of profits yet. In fact, Vertical reported yesterday evening that its quarterly GAAP net loss nearly quintupled. Ouch.

But the story isn't that simple. It seems Vertical is trying to forge a turnaround -- and selling stock to do so. And it just so happens that the buyers are insiders. They've snapped up more than $13 million in shares since last week in a private placement. Those funds, plus another $9 million in lender financing, are to be used to purchase the assets of bankrupt competitor Comdial. Considering Vertical's already huge losses, I've my doubts that the strategy will work, but let's give the company the benefit of the doubt for the moment.

Besides, there are other dealings here that deserve a little Foolish scrutiny. For instance, it turns out that all of Vertical's insiders bought last Wednesday at roughly $1.14 per stub (I'm rounding up). That wouldn't be bad except that, according to our records, the stock never traded below $1.18 a share that day.

Now, I'm not suggesting this is illegal, 'cause it's not. However, this offering will result in some dilution, particularly given the issuing price compared to current per-share value. And we're looking at a case of adding insult to injury if the company overpays for Comdial's assets.

Besides, do you really want to pay $1.50 a share when management's buying at $1.14? Not me, thanks.

Amazing Grace?
On Sept. 22, less than a week after cashing out more than $45 million in stock of metal forger Ladish, hedge fund manager Grace Brothers began adding to an already sizeable position in Ultralife Batteries. As you might suspect, Ultralife makes very long-lasting batteries, for both consumers and the military.

It's not entirely clear to me what Grace sees. Operating expenses are up, gross margin is down, and revenue was sharply lower in the most recent quarter. Guidance for the remainder of the year was also recently lowered. Still, Grace appears to see value. It spent more than $7 million to pick up more than 700,000 shares last month, making the fund manager Ultralife's largest single stockholder.

Crack open the books
Finally, we close by opening the books on ITT. We've covered the company plenty recently. And for good reason: The second quarter saw ITT's earnings per share rise by more than 60% after a troubling investigation was swept aside. Naturally, it was right about then that private equity firm Blum Capital began adding to its position in the stock. Last week brought $2.4 million more in purchases.

Interestingly, Blum is a self-described value investing firm that says its funds have beaten the S&P 500 and Russell 2000 since 1975. Unfortunately, we have no way to verify this. But given Blum's five attributes of a worthy investment, I'm inclined to give it the benefit of the doubt. Among the list: good fundamentals highlighted by substantial free cash flow, and the potential to double its investment over a two-to-three-year period. Sounds good to me. In fact, it's enough to put the stock on my watch list. And might I suggest that you should do the same?

That's all for this week See you back here next Tuesday 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:

Get all the inside information you need in 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. Your portfolio will thank you.

Fool contributor Tim Beyers usually 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 is in his portfolio by checking Tim's Fool profile here. The Motley Fool has an ironclad disclosure 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.

Compare Brokers

Fool Disclosure

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: 497481, ~/Articles/ArticleHandler.aspx, 10/25/2016 5:13:42 PM

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...

Today's Market

updated Moments ago Sponsored by:
DOW 18,169.27 -53.76 -0.30%
S&P 500 2,143.16 -8.17 -0.38%
NASD 5,283.40 -26.43 -0.50%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/25/2016 4:00 PM
CSCO $30.34 Down -0.12 -0.39%
Cisco Systems CAPS Rating: ****
ESINQ $0.02 Down +0.00 +0.00%
ITT Educational Se… CAPS Rating: **
MSFT $60.99 Down -0.01 -0.02%
Microsoft CAPS Rating: ****
MWY.DL2 $0.00 Down +0.00 +0.00%
Midway Games, Inc. CAPS Rating: *
ULBI $4.65 Down +0.00 +0.00%
Ultralife Batterie… CAPS Rating: No stars
WLB.DL2 $0.00 Down +0.00 +0.00%
Westmoreland Coal… CAPS Rating: **