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 1/30/07

Total value of stock purchased

52-week change

Consolidated-Tomoka (AMEX: CTO  )

$77.82

$731,684

10%

General Electric (NYSE: GE  )

$36.03

$727,399

10%

StarTek (NYSE: SRT  )

$10.18

$95,928

(50%)

Home Bancshares (Nasdaq: HOMB  )

$24.96

$11,963

25%*

OMNOVA Solutions (NYSE: OMN  )

$6.13

$4,574

(9%)

Sources: Fool.com, Yahoo! Finance, Form 4 Oracle, SEC filings
*Home Bancshares began trading on June 23, 2006.


A generally attractive stock
I've long loved General Electric. CEO Jeff Immelt's management style is inherently Foolish, and he invests right alongside common shareholders.

That's why the General has appeared in this column five other times, as recently as October. Yet with just three stars, GE has failed to win the hearts of the Fools participating in our Motley Fool CAPS investor-intelligence database:

Metric

GE

CAPS stars (out of five)

***

Total ratings

1,915

Bullish ratings

1,700

Bull ratio

88.8%

Bearish ratings

215

Bear ratio

11.2%

Bullish pitches

334

Bearish pitches

37

Data current as of Jan. 30, 2007.

What gives? All-Star CAPS investor TRBaker offers this bearish thesis:

"GE needs to continue pruning its portfolio of underperforming business units. Great [management] team, but they play in very mature markets, where they already have high market shares leaving very little opportunity for top-line or bottom-line growth."

That's mostly true. When Jack Welch was CEO, GE worked hard to be first or second in every business in which it participated. Now, GE Capital accounts for roughly half of the General's net income. That's caused Immelt to resort to the corporate equivalent of plastic surgery to inject growth into flagging operations.

No wonder investors are nervous. Makeovers, especially the corporate kind, are inherently risky. After all, there's a fine line between America's Next Top Model and Beauty and the Geek.

Nevertheless, considering the more than $33 million at stake in his personal portfolio, I'm inclined to trust Immelt's judgment. Besides, he's one of many insiders adding skin in the game. Long-term director Claudio Gonzalez added 60,000 shares to his portfolio on Friday, 42,000 of which were purchased for $1.5 million on the open market.

What's more, Immelt's team has grown normalized earnings per share by more than 11% over each of the past three years. Yet in that time, GE's stock has appreciated by less than 10% in total. Not exactly fair, is it? That's why I've just added GE to my CAPS watch list, and why I'll seek the next opportunity to add it to my portfolio.

A new captain for the StarTek enterprise
Denver-area outsourcing firm StarTek, which has long sported a dangerous dividend, has a new CEO -- and he's buying stock.

On Thursday, Larry Jones, who replaced fired chief executive Steven Butler, bought 10,000 shares to begin his personal portfolio. That's a good start. As with Scott Jones at Cantel Medical (NYSE: CMN  ) , StarTek's Jones has a tough assignment. Getting skin in the game early should give investors confidence.

But I'm less impressed with his employment agreement. Jones is guaranteed a $450,000 annual salary, which can only be reduced if all executives take a pay cut. He's also eligible for an annual bonus of as much as 125% of his net pay.

What's so troubling about that? Nothing. It's the terms of the bonus that bother me. From the 8-K filing explaining the arrangement:

"Mr. Jones will be eligible for an annual incentive bonus for each fiscal year of up to 125% of his then current annual base salary, subject to achievement of performance criteria and satisfaction of terms established by the compensation committee after consultation with Mr. Jones." [Emphasis mine.]

In other words, Jones can lobby the board to keep a low hurdle for achieving his unspecified performance targets. Nice. Wish I could get that deal.

If there's anything attractive about StarTek, it's the dividend, which currently yields more than 10%. Trouble is, the firm was free cash flow-negative over the last 12 months -- the first time that's occurred in at least six years. Meanwhile, cash on hand has declined from $46 million at the end of 2005 to $27 million at the end of September. At some point, management will have to stop withdrawing money from the bank to pay shareholders. My guess is it'll happen in a matter of months, if not weeks.

That's all for now. 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 996 out of more than 21,200 in Motley Fool CAPS, usually favors two scoops of ice cream over the inside scoop. Tim didn't own stock 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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