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, Sept. 11

Total Value Purchased

52-Week Change

Cost Plus (NASDAQ:CPWM)

$4.10

$2,099,659

(65%)

Dominion Resources (NYSE:D)

$85.60

$1,273,576

12%

Hercules Offshore (NASDAQ:HERO)

$26.10

$735,972

(10%)

Radian Group (NYSE:RDN)

$18.77

$313,742

(69%)

Smart Balance (NASDAQ:SMBL)

$10.99

$20,020,755

1%*

Sources: Fool.com, Yahoo! Finance, Form 4 Oracle, SEC filings.
*Smart Balance began trading on May 1, 2007.

Your portfolio needs a hero
For all the talk of a large-cap rally, there are still dozens of small caps worth owning. Hercules Offshore, which operates the world's fourth-largest fleet of oil and gas rigs, could be one. Or so says Tom Gardner, who placed the stock in the Motley Fool Hidden Gems portfolio.

Nevertheless, Hercules hasn't been kind to investors lately; the stock is down about 10% since January. Part of the problem appears to be slowing domestic operations, writes fellow Fool Jim Gillies in a recent Hidden Gems update.

Yet Motley Fool CAPS investors remain undaunted:

Metric

Hercules Offshore

CAPS stars (out of 5)

*****

Total ratings

613

Bullish ratings

605

Bull ratio

98.7%

Bearish ratings

8

Bear ratio

1.3%

Bullish pitches

122

Bearish pitches

2

Data current as of Sept. 11.

Why so bullish? All-Star TheGarcipian offers this highly rated thesis:

What part of the picture are we missing, if anything? It seems too good to be true. Profit and operating margins of 35% and 45%, respectively. [Return on assets] of 21%, [return on equity] of 39% (!), a PEG ratio of only 0.18, and a fairly low debt-to-equity ratio of 25% (which I consider low for this capital-intensive industry; heck, I've got tenants that have higher debt/equity ratios!).

If this story really is too good to be true, management will pay the price right alongside investors when the fantasy ends. CEO Randy Stilley added 9,000 shares to his portfolio last Friday. Director Steven Webster bought 20,000 shares the same day.

Good move. Even though there's a reported glut of lift boats under construction in Hercules' backyard in the Gulf of Mexico, which could hurt margins, there's little evidence that oil prices will fall appreciably, if at all.

Meanwhile, international operations, notably drilling off the coast of Africa, still represent a major growth opportunity. I'm adding Hercules Offshore to my CAPS portfolio today.

Is it time to talk turnaround?
Color me less confident about Radian, a mortgage insurer that is facing outsized losses thanks to the subprime meltdown. But there are those who think the firm will not only survive but will also deliver market-thumping returns.

One of those on the list is Marty Whitman's Third Avenue mutual fund shop. That's no small endorsement. Whitman has long been known as a championship fund manager capable of defying conventional wisdom in the pursuit of market-thumping returns.

But Whitman isn't exactly alone in his quest for Radian shares. Insiders are also buying. On Monday, CEO Sanford Ibrahim and chairman Herbert Wender combined to purchase 18,400 shares.

Should you buy, too? I hesitate to say yes. As much respect as I have for Whitman and his team, history says that great investors can be wrong. Witness ailing retailer Cost Plus. Though top investors and insiders are betting big on a turnaround, they've been doing that since at least January of last year. Look what's happened since. Buyer beware.

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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