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 this week.

The week's buying

Company

Closing Price 6/21/07

52-Week Change

Total Value Purchased

Mylan Laboratories
(NYSE:MYL)

$18.79

(8%)

$742,849

Cherokee
(NASDAQ:CHKE)

$37.51

(1%)

$637,569

Luminent Mortgage
(NYSE:LUM)

$9.29

5%

$292,985

MVC Capital
(NYSE:MVC)

$19.73

51%

$231,638

Willis Lease Finance
(NASDAQ:WLFC)

$11.00

29%

$168,000

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

Two of the very best insider buys
I'll bet that if we went back and examined all the best insider buys, we'd find scores of executives and board members buying at the same time. Sadly, we don't have time for a complete review. But I can give you two of my favorite examples.

Rewind to February of 2006. Consumer durables specialist Chattem (Nasdaq: CHTT  ) had just reported fourth-quarter results that missed analyst expectations. Growth was expected to slow temporarily. Yet insiders kept the faith. Six of them spent $650,000 to acquire shares. Today, their stake is worth nearly $1.1 million.

Now, fast-forward six months to August. Days after disappointing the Street, 10 insiders at heating and air conditioning unit manufacturer Goodman Global (NYSE: GGL  ) spent roughly $2 million to acquire stock. They're sitting on more than $3.5 million today.

An eye on Mylan Labs
See the pattern at work here? When lots of insiders see so much value in the stock that they buy, it's worth your time to investigate.

Which brings me to Mylan Labs, a generic drug specialist that gets a lukewarm reaction from the professional and amateur stock pickers in our Motley Fool CAPS investor-intelligence database:

Metric

Mylan Labs

CAPS stars (out of 5)

***

Total ratings

130

Bullish ratings

119

Bull ratio

91.5%

Bearish ratings

11

Bear ratio

8.5%

Bullish pitches

24

Bearish pitches

5

Data current as of June 22, 2007.

Insiders are far more enthusiastic. Since June 12, three of them have bought shares, including CEO Robert Coury, who added 50,000 shares, and Chief Financial Officer Edward Borkowski, who purchased 5,000 shares.

That's a lot of buying. What's driving it? Valuation is my guess. As of today, Mylan trades for a fraction of its expected growth rate, giving it a PEG ratio of just 0.79.

Mylan also sports a 1.30% dividend, which it pays for through existing cash from operations. Signs like that point to a very healthy business.

If there's skepticism about the future of Mylan, it's because of the company's planned $7 billion buyout of the generics business of Merck KGaA. Here's how biotech observer and Foolish colleague Brian Lawler put it when the deal occurred:

... In the generic drug industry it's either eat or get eaten by rivals, and Mylan has obviously chosen to be the bigger fish and make the acquisition in order to continue operating independently.

Executives think that's where the profits lie, and they're voting with their wallets. Keep a close eye on this company, Fool.

Paying the bills at Luminent
So far, so good. That's how I see Luminent Mortgage these days. For the uninitiated, Luminent derives much of its business from Alt-A loans, which are just a step above subprime loans and, all too often, behave a lot like them.

Having "Alt-A" within spitting distance of its name sent Luminent's stock reeling during the subprime crisis. But that didn't seem fair; Luminent's Alt-A customers have better-than-average credit.

Spotting an opportunity, insiders took advantage of the sell-off. Six of them, including both executives and board members, spent more than $200,000 on new shares. The stock is up more than 8% since.

Apparently that's not enough of a rally. Four more insiders have purchased shares since June 12, including Chief Financial Officer Christopher Zyda and CEO S. Trezevant Moore Jr. Yep, I'm glad to have this stock in my CAPS portfolio.

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 5,240 out of more than 30,800 rated players 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. Tim's portfolio holdings can be found at his Fool profile. His thoughts on insider buying, Foolishness, and investing in general may be found in his blog. MVC Capital is a Hidden Gems pick. The Motley Fool's disclosure policy only stays inside when it has to.


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