Who's Buying Now?

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

The week's buying

Company

Closing price 2/7/06

Total value of stock purchased

52-week change

Dominion Resources (NYSE: D  )

$75.17

$1,738,451

+7%*

Goodrich Petroleum (NYSE: GDP  )

$26.96

$1,158,889

+39%

iPass (Nasdaq: IPAS  )

$7.35

$897,571

+13%

ITT Educational Services (NYSE: ESI  )

$63.02

$2,902,000

+25%

St. Jude Medical (NYSE: STJ  )

$47.95

$523,948

+22%

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

Heyyy, St. Jude
Over the short term, investing is almost entirely about timing. So, naturally, you've got to hand it to Michael Rosseau and William McGarry, two insiders at St. Jude Medical who last week bought 10,000 and 1,000 shares, respectively. Yesterday, the company announced that its newest pacemakers, already in use in Europe, have received approval from the Food and Drug Administration.

Not to give short shrift to the technology, which is designed to reduce hospital time for patients, but I think there's much more to this story. That's because, in late January, Foolish colleague Stephen Simpson wondered whether (or when) Johnson & Johnson (NYSE: JNJ  ) , which lost a bidding war for Guidant to Boston Scientific (NYSE: BSX  ) , would take a close look at acquiring St. Jude.

Doing so makes even more sense today. Let me explain. St. Jude is in roughly the same business as Guidant, except that St. Jude's specialty is implantable cardioverter defibrillators, or ICDs. Guidant also produces heart stents, which are used for opening blood vessels in the treatment of certain kinds of heart disease. Both technologies are crucial to medical care, especially among older populations, but it's the ICD that has really taken off.

Indeed, according to its most recent earnings announcement, St. Jude saw 62% year-over-year growth in its core ICD business. That, however, was below analyst expectations, and there's been a sell-off in the shares as a result. (The stock is down roughly 8%.)

Still, many on the Street remain bullish about the shares. There's good reason to be, because growth should remain strong. Not only will the newly approved pacemaker be -- pardon the pun -- in circulation, but it'll be one of a good number of new cardiac rhythm management products set to debut this year. That could be why analysts have forecast earnings of $1.77 per stub for 2006, which puts the stock trading for 27 times forward earnings. No doubt, that's rich. But too rich for a 30% grower? No, probably not.

Finally, consider that J&J had originally brokered a deal with Guidant, before Boston Scientific interrupted the proceedings. That arrangement included a $705 million cancellation fee, which, according to this press statement, should have already been paid. That's $705 million that would help defray the cost of acquiring St. Jude.

So, odd timing aside, I think it's safe to say that neither Rosseau nor McGarry was thinking about FDA approval when buying shares. A possibility: They were a little jealous of Guidant and hoping for some of J&J's green. I mean, really, wouldn't you be?

Eminent Dominion
If you're like me, you know The Matrix series of movies. The first one was great. The last two? Not so much. But I can't get one line from the third and final installment -- The Matrix: Revolutions -- out of my head as I write today.

Toward the beginning, there's a scene where several of the main characters are attempting to free Keanu Reeves' Neo from an odd prison: a virtual train station with no exit. The key to escape lies with a program being held captive by the antagonistic and pompous Frenchman. (Yes, really.) As the heroes confront him, the Frenchman drips philosophical insults that are, in their own way, self-congratulatory. Here's one: "Where others see coincidence, I see consequence." Ooooookaaaaaay.

The truth is, I really had no idea what Frenchie was talking about when I saw the movie. But now I think I know, thanks to four insiders at Dominion Resources. Between Monday and Wednesday of last week, they bought 23,000 shares of the energy firm. Coincidence? Maybe, but I'm more inclined to believe they've foreseen the consequence of an undervalued stock -- greater returns.

How undervalued, you ask? That's hard to say. But according to Yahoo! Finance, earnings are expected to climb more than 30% in 2006, yet the stock trades for only 13.5 times those improved results. Furthermore, Dominion recently hiked its quarterly dividend by $0.02 per stub, which brings its 12-month yield to a very healthy 3.7%. If only every investment I made had such consequences, eh?

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