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, I've uncovered my top five this week.

The week's buying

Company

Closing Price 9/6/07

Total Value Purchased

52-Week Change

Eddie Bauer (NASDAQ:EBHI)

$9.02

$387,664

(6%)

Meritage Homes (NYSE:MTH)

$16.73

$293,315

(58%)

OYO Geospace (NASDAQ:OYOG)

$80.84

$1,511,600

38%

Poniard Pharmaceuticals (NASDAQ:PARD)

$5.89

$527,402

73%

Tenet Healthcare (NYSE:THC)

$3.50

$303,105

(58%)

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

Caught in the bubble babble
Once more, we dig into a stock hurt by the credit crunch that's battered the stock market in general and real estate stocks in particular. Is Meritage Homes, which hawks family-sized dwellings through the South and West, worth the risk?

Not many in our Motley Fool CAPS investor-intelligence database think so.

Metric

Meritage Homes

CAPS stars (5 max)

**

Total ratings

672

Bullish ratings

515

Bull ratio

76.6%

Bearish ratings

157

Bear ratio

23.4%

Bullish pitches

85

Bearish pitches

27

Data current as of Sept. 6, 2007.

After looking at the numbers, I understand why. Meritage builds homes in six states. Four of them -- Arizona, California, Florida, and Nevada -- host one-third of the nation's subprime adjustable-rate mortgages. But now these death-spiral loans are out of style, which means no more borrowing a cool million to get that hot, un-air-conditioned garage in SoCal.

The timing couldn't be worse for Meritage, which had to write off $100 million in inventory in July. Returns on equity and capital have collapsed into the single digits. Free cash flow is down to negative $152 million over the trailing 12 months. Can this relatively small company, once known only as a local Phoenix-area builder, survive the gnashing of teeth that's still to come?

At least two investors think so. Board member Robert Sarver, who also runs Western Alliance Bancorp (NYSE: WAL  ) , bought 15,100 shares a week ago today. CEO Steven Hilton joined him the same day, in buying 3,150 shares at $16.49 a pop.

They may prove to be prescient. Even though Meritage's debt load is huge, it accounts for just 48% of total capital, according to Capital IQ. By contrast, peers Centex (NYSE: CTX  ) and KB Home count debt as more than 50% of capital.

What's more, by today's prices, each dollar of Meritage revenue is worth just $0.16. That's well below the industry average of $0.30 and the average of it peers. Accordingly, I expect any modest sales improvements to have a substantial impact on the stock. Look for Meritage to be added to my CAPS watch list later today.

Oh, my, OYO
Then there's a stock I wish I'd put on my watch list years ago: OYO Geospace, which fellow Fool Bill Mann picked for Motley Fool Hidden Gems in April of last year. The shares are up almost 63% since then. (Hey, Bill. Call me next time, OK?)

But OYO, which specializes in monitoring oil and gas reserves, could still be cheap. That's according to chief technical officer Michael Sheen, who, shortly after exercising and then selling a little more than 10,000 shares acquired via options, bought 10,000 more shares on the open market.

Good move. Returns on capital have rocketed in recent quarters, yet mutual funds continue to ignore the stock. (They own less than 50% of the outstanding shares.) I don't think that will last. Thus, I'm adding OYO Geospace to my CAPS watch list today.

And that's your update. 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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