Who's Buying Now?

It's time to check the most interesting insider purchases for the week. After reading through numerous filings using insider tracking tool Form 4 Oracle, here are my top five now:

The week's buying

Company

Closing
Price 3/7/07

Total Value
of Stock
Purchased

52-Week
Change

American Capital Strategies (Nasdaq: ACAS  )

$43.05

$2,694,001

23%

Bitstream (Nasdaq: BITS  )

$7.26

$410,822

0%

Cenveo (NYSE: CVO  )

$23.75

$1,848,617

56%

Montpelier Re (NYSE: MRH  )

$17.50

$704,423

6%

RPC (NYSE: RES  )

$15.64

$22,023,289

23%

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

A capital idea
Having spent many of my formative working years in and around Silicon Valley, I have a profound appreciation and respect for venture capitalists. Never in my life have I seen a group of investors so conservative as most VCs.

Which brings me to Income Investor pick American Capital Strategies. Though not exactly a VC, this publicly traded business development company provides debt financing to firms that need it and then returns 90% of its investing profits to shareholders as dividends.

But AmCap's structure isn't what makes me liken it to the VCs I know. Comments from informed stock watchers like fellow Fool Stephen Ellis are what capture my attention. Here's one from November, about its internal rate of return: "Assuming the firm exits all of its investments at current valuations, American has achieved a 16.2% IRR since 1997, and 19.2% IRR since 2001 -- both numbers I think any Foolish investor would be ecstatic with."

I'll say. Such returns are frequently the domain of top-notch venture firms like Kleiner Perkins, Benchmark Capital, and Sequoia Capital. Perhaps that's why AmCap has a loyal following among those participating in our Motley Fool CAPS investor intelligence database:

Metric

ACAS

CAPS Stars (5 Max)

*****

Total Ratings

495

Bullish Ratings

479

Bull Ratio

96.8%

Bearish Ratings

16

Bear Ratio

3.2%

Bullish Pitches

103

Bearish Pitches

5

Note: Data current as of March 8.

Or maybe it was the latest earnings report. Three weeks ago, American Capital projected a 15%-25% increase in its 2007 net asset value, while upping its payout by 11%. Mix in a rapidly-growing asset management business and, as Stephen reported at the time, there's potential for massive amounts of value creation.

Management, however, seems to be certain that potential will be realized. On Monday, three different insiders purchased shares, including CEO Malon Wilkus, who added 6,000 shares each for his and his wife's portfolios, at roughly $42 a stub.

That's enough to get the Foolish bargain hunter in me interested. I'm adding this stock to my CAPS portfolio today.

Bad business, good stock?
Then there's Bitstream, which makes fonts and display technology that can also be used in mobile devices.

If that sounds interesting, remember that having somewhat similar technology hasn't done much for Rule Breakers pick Openwave (Nasdaq: OPWV  ) . I'm equally dubious of Bitstream being successful in a market that's long been dominated by big firms like Adobe (Nasdaq: ADBE  ) .

Interestingly, the insiders don't share my skepticism. Between the end of last week and Monday, CEO Anna Chagnon and two of her fellow board members teamed to spend more than $410,000 to boost their direct holdings.

That's impressive. Yet I'm still not ready to call this a buy for my CAPS portfolio. Why? I don't see a sustainable competitive advantage at work for Bitstream. After all, doesn't everyone make fonts?

Perhaps. Or perhaps I need to dig deeper. With three years of sales growth above 27% and rapidly rising returns on equity and capital, Bitstream seems capable of delivering big returns for investors.

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, who is ranked 751 out of more than 23,900 in 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. His portfolio holdings can be found at Tim's Fool profile. His thoughts on insider buying, Foolishness, and investing in general may be found in his blog. Montpelier Re is recommended in both Motley Fool Hidden Gems and Stock Advisor. The Motley Fool's disclosure policy is a strong buy.


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8/27/2014 12:42 PM
ACAS $15.52 Down -0.03 -0.21%
American Capital,… CAPS Rating: ****
ADBE $71.84 Up +0.31 +0.43%
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