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, I give you my top five from the past seven days.

The Week's Buying

Company

Closing Price 1/3/07

Total Value of Stock Purchased

52-Week Change

Commercial Metals (NYSE: CMC  )

$25.63

$50,880

32%

ConAgra Foods (NYSE: CAG  )

$27.00

$204,149

31%

Emeritus (AMEX: ESC  )

$26.00

$376,406

20%

Repros Therapeutics (Nasdaq: RPRX  )

$12.13

$4,858

142%

SulphCo (AMEX: SUF  )

$4.70

$161,800

(64%)

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

ConAgra is no con job ...
It was the early days of summer when struggling packaged-foods supplier ConAgra first changed its reporting as part of a broad restructuring plan. Some of us Fools had doubts over the veracity of the plan and, thereby, the cheapness of the shares. ConAgra's stock is up more than 20% since. Whoops.

But is ConAgra still a bargain? Management seems to think so. Last Tuesday -- the day after Christmas -- chief financial officer Andre Hawaux became the third senior executive to buy shares on the open market since early October. Hawaux nearly doubled his direct stake (i.e., options not included) by purchasing 7,500 stubs at $27.22 each.

Meanwhile, October's buyers included CEO Gary Rodkin, who spent $1.8 million, and executive vice president for legal and external affairs Rob Sharpe Jr., who spent roughly $270,000. But that's not been enough to inspire the investors participating in Motley Fool CAPS:

Metric

ConAgra

Total ratings

82

Bullish ratings

61

Bull ratio

74.4%

Bearish ratings

21

Bear ratio

25.6%

Bullish pitches

9

Bearish pitches

3

Data current as of Jan. 4, 2007.

Don't let that 74.4% bull ratio small-f fool you. CAPS players tend to be bullish. If 25% still see downside from here, it's a good bet that the mood of the community is cautious at best.

Can you blame them, though? Beaten-down stocks don't usually have the long tail of multibagger returns that go-go-growth issues do. Up more than 30% last year, and trading for nearly three times its long-term growth rate, ConAgra's stock is nowhere near cheap by the numbers.

So why are executives buying? Two straight quarters of improving cash flow and earnings may have something to do with it. Let's start with the first quarter. According to SEC filings, ConAgra improved from a loss last year to more than $330 million in free cash flow. Meanwhile, in Q2, earnings rose 38% despite an anemic 2.9% gain in revenue. Those are impressive achievements. Color me intrigued enough to put this stock on my CAPS watch list.

... But the suffering may continue for SulphCo
I'm less inclined to include oil and gas equipment provider SulphCo, which says it uses ultrasound technology to reduce the presence of sulfur and nitrogen in crude oil and petroleum. Theoretically, this process could help to transform unusable stocks of heavy oil into usable light, sweet crude.

No doubt, that's interesting to some investors. Why? Motley Fool Rule Breakers pick Headwaters (NYSE: HW  ) , though using different technology, has established a division aimed at achieving the same result. Problem is, SulphCo isn't Headwaters. It isn't even close. Capital IQ shows exactly $43,000 in sales since 2002. Headwaters, meanwhile, has booked $1.1 billion in sales over the past 12 months.

As if CEO Rudolf Gunnerman cares. Since last January, he's spent more than $160,000 on shares of the company, which, at more than $330 million, is worth roughly a third of the market value of Headwaters. What gives? I've no idea. There certainly doesn't seem to be a business reason for the buying. Consider this 8-K, which says that an agreement with France's Total SA (NYSE: TOT  ) has been extended for the second time to "obtain data and results." Probable translation: Let's wait till the technology works as promised.

Then there's this letter from Gunnerman's son, Peter, who has long acted as president and chief operating officer. Quoting: "My decision to resign is the culmination of a number of factors, principally the deterioration in communications between the Board of Directors and management and the failure of the Board to give appropriate weight to the views of management."

Uh-oh. If there is a rift as the letter suggests, then Gunnerman's buying is hardly surprising. Do the math. He and Peter together owned roughly 41% of the shares outstanding as of May 15. If Peter hasn't sold any shares -- and I find no evidence that he has -- then his 1.915 million stubs combined with his father's 29.363 million shares would account for 43% of the company. Adding another 5 million stubs to their portfolios would give the pair more than 50% of the voting stock -- enough to stiff-arm even the most aggressive director.

The lesson? Insider buying isn't always as bullish as it appears. I wouldn't say it's bullish at all in the case of SulphCo, and I'll be immediately shorting the stock in my CAPS portfolio. 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 contributor Tim Beyers, ranked 2,735 out of more than 19,100 participants in Motley Fool CAPS, 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. Get the skinny on all of the stocks in his portfolio by checking Tim's Fool profile. The Motley Fool's disclosure policy is a strong buy.


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