Who's Buying Now?

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

The Week's Buying

Company

Closing price
1/13/06

Total value
of stock
purchased

52-week
change

Bear Stearns
(NYSE: BSC  )

$121.13

$2,133,119

+ 22%*

Colonial BancGroup
(NYSE: CNB  )

$23.92

$114,314

+19.5%*

Fossil
(Nasdaq: FOSL  )

$22.57

$1,541,925

-18%

General Electric
(NYSE: GE  )

$33.29

$503,100

-6%*

James River Coal
(Nasdaq: JRCC  )

$38.55

$1,179,300

-3%

Sources: Fool.com, Yahoo! Finance, Form 4 Oracle.
*Returns adjusted to reflect the impact of dividends.

A bull stalks the bear
I've been asked a few times whether I place much faith in insider buying. My answer, naturally, is that it depends. What I mean is: Who's buying? Is it a hedge fund? If so, what's the reputation of the fund? Is it an executive? If so, how big is the buy? What does it do to the exec's holdings? And so on.

That's why this week's first buy interests me. The instigator, Paul A. Novelly, is a Bear Stearns director, a role he's held since 2002. And he's been loading up on the stock of the broker since early 2004, according to Form 4 Oracle. But his last purchase before the one he made on Jan. 12 was last May. It's worth asking: What's happened in eight months that would motivate him to spend millions on the stock now?

Before I venture a guess, let's have a look at the man behind the purchases. According to various press reports I found whilst Googling, Novelly grew up poor in St. Louis, put himself through school, earned a finance degree, and invested everything to buy a 10-year partnership stake in privately held Apex Oil as an employee in 1979.

The good times didn't last, however. Apex got overextended during the early years of his tenure at the top, and the company was forced to file for bankruptcy protection on Christmas Eve 1987. But Novelly persisted, and Apex endured. By the time the company left the confines of the courts in 1990, Apex had paid back its obligations at a rate between $0.64 and $0.86 on the dollar, according to press accounts.

And the company has thrived since. According to the latest report I can find -- from this 1999 Washington Post article -- Apex collected $1.2 billion in revenue in 1998. There's no way to know for sure what the company earns now, but if it has followed the growth in per-barrel oil prices, then it could well be something like a $4.7 billion company today. Regardless, Apex is probably very well positioned, and Novelly is probably very rich.

He's also a survivor, a disciplined businessman, and a savvy investor willing to take on big risks in exchange for outsized rewards. So, back to the original question: What is it about Bear Stearns that has changed over the past eight months to make it an attractive investment?

How about improved earnings in both Q3 and Q4? Or maybe a better valuation? Indeed, a check of Yahoo! Finance shows that Bear Stearns is among its industry's best in gross and operating margin and that it trades for virtually no premium to its larger rivals, including Goldman Sachs (NYSE: GS  ) and Lehman Brothers (NYSE: LEH  ) . And that's after a 20%-plus price move since Novelly last bought shares. Sounds pretty good to me.

Settling on Colonial
Regional banks aren't typically my bailiwick. But I can't help myself with Alabama-based Colonial BancGroup. Chief Financial Officer Sarah Moore, who bought 3,800 shares last week, is simply too interesting to ignore.

According to this press release issued by the State of Alabama one year ago, Moore has joined the board governing the state's prepaid college tuition and 529 college investing plans. She's also been an auditor, has testified before Congress on monetary policy, and is no older than her early 40s.

As such, there's every reason to believe she's a pretty good investor with a long-term horizon. But she also wasn't the only one who bought shares last week. A check of the relevant filing with the Securities and Exchange Commission shows that her son spent more than $23,000 for 1,000 shares of stock in the bank. I don't know of many kids beyond the Hiltons who've got that much cash to put to work in the market. Do you? If so, would you put me in touch, please?

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.

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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 is in his portfolio by checking Tim's Foolprofile. The Motley Fool has an ironcladdisclosure policy.


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