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 from the past seven days:

The week's buying

Company

Closing price 7/18/06

Total value of stock purchased

52-week change

Chaparral Steel (Nasdaq: CHAP  )

$65.45

$135,397

219%

Mexico Fund (NYSE: MXF  )

$30.81

$927,303

33%

Saba Software (Nasdaq: SABA  )

$5.47

$23,474

29%

Shaw Group (NYSE: SGR  )

$21.28

$5,297,370

7%

Winmark (Nasdaq: WINA  )

$25.25

$101,000

44%

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

The stock of steel?
Stocks that aren't easily categorized most frequently trip me up on my investing. Structural steel producer Chaparral strikes me as a good example of such a firm. On the one hand, it trades for nine times forward earnings and roughly equal to its trailing 12-month sales, making it seem like a deep value. On the other, operating income more than doubled during the most recent quarter and the stock has tripled since debuting last July, making it seem like a classic growth play. Both, and neither, may be true.

It's more important to me, however, that Chaparral doesn't really stand out when compared with peers:

Metric

Chaparral

Lamson & Sessions (NYSE: LMS  )

Acuity Brands (NYSE: AYI  )

Market cap

$1,570 mil

$390 mil

$1,850 mil

TTM sales

$1,470 mil

$530.8 mil

$2,320 mil

Trailing P/E

10.26

11.23

20.73

Forward P/E

9.4

11.9

15.39

Price-to-book

2.25

3.57

3.43

Price-to-sales

1.03

0.7

0.78

Source: Yahoo! Finance

Where's the bargain? Ask the insiders. They're buying by the bucketload. Board member Joseph Mahaffey joined the party Monday, snapping up 2,000 shares for $67.70 each -- just two months after Chief Financial Officer Celtyn Hughes and raw materials VP Richard Jaffe exercised and held options on more than 20,000 stubs.

What gives? Foolish friend Stephen Simpson offers a thesis in his analysis of Chaparral's latest earnings report. He writes, "Chaparral gets most of its business from non-residential building construction and civil-engineering projects like roads and bridges. And with activity apparently picking up in both of those markets, that's not a bad place to specialize right now."

Well put, Stephen. Of course, he's also correct to warn against acting hastily with these shares. The law of gravity applies to all stocks sometime, and Chaparral's rocket ride will end, even if executives don't expect it to occur soon.

Viva Mexico
Recently, we Fools held the "Investing World Cup," in which writers dueled over the investing merits of several regions of the world. Mexico was one, led by Foolish friend Seth Jayson. While his argument didn't win, it resonated with me. He's right; several stocks south of the border deserve a look, including Cemex. But the region itself faces the possibility of recession, a fleeing workforce, and other problems.

That's one of the reasons I really like funds. They offer both diversity and high returns when managed well. Closed-end funds are sometimes even better, since they trade just like stocks. Take the Mexico Fund, for example. Since 1987, it has returned roughly 21% annually, and is already up roughly 11% during 2006. And now the fund's investment advisor, Impulsora Del Fondo Mexico, is leading a repurchase program during July that fund directors say is aimed at "boosting liquidity."

Frankly, I've got no idea what that means. All I know is that professional stock pickers tend to spend funds when there's a reasonable chance of boosting shareholder returns. With the Mexico Fund's impressive record, I'm willing to give Impulsora ample leeway.

And that's all for this week. See you back here next Wednesday, 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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