It's Wednesday, 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 11/13/07 |
Total Value Purchased |
52-Week Change |
|---|---|---|---|
|
Allied Capital |
$25.75 |
$2,942,350 |
(19.30%) |
|
American Express |
$59.16 |
$1,766,133 |
(0.30%) |
|
AutoNation |
$17.48 |
$27,455,230 |
(14.73%) |
|
ViroPharma |
$8.63 |
$8,874,138 |
(32.31%) |
|
Wachovia |
$43.74 |
$4,412,204 |
(21.51%) |
What can I do to get you into this car?
When superior investors buy, I pay attention. That's the case today with AutoNation, which superstar stock picker Eddie Lampert, worth $4.5 billion and ranked 68th on Forbes' latest list of America's richest people, has been buying since at least late October.
But those are only the buys we know about. According to this SEC filing, his hedge fund, ESL Investments, owned roughly 50 million shares of AutoNation before this latest buying spree. Lampert has since raised his stake to 52.3 million shares, or 28.4% of the outstanding shares.
For me, there's only one way to interpret that: Lampert thinks the recent decline in AutoNation shares, fueled in part by subprime fears, is unjustified.
Board members Kim Goodman and Robert Grusky, also recent buyers of AutoNation stock, appear to agree. But not the majority in our 74,000-strong Motley Fool CAPS community:
|
Metric |
|
|---|---|
|
CAPS stars (5 max) |
* |
|
Total ratings |
43 |
|
Bullish ratings |
31 |
|
Bull ratio |
90.0% |
|
Bearish ratings |
12 |
|
Bear ratio |
10.0% |
|
Bullish pitches |
2 |
|
Bearish pitches |
3 |
I won't be joining the bears. As unstable as the auto business has been in recent years -- ask anyone who owns shares of Ford
|
Metrics |
Trailing 12 Months |
2006 |
2005 |
2004 |
|---|---|---|---|---|
|
Return on capital |
6.4% |
6.6% |
6.6% |
6.3% |
|
Return on equity |
8.8% |
7.9% |
8.9% |
9.6% |
|
Gross margin |
16.1% |
16.0% |
15.9% |
15.6% |
As such, I believe that management and Lampert deserve the benefit of the doubt. I'll be adding AutoNation to my CAPS watch list today.
The only turnaround I'll ever buy
Regular readers know that I loathe turnaround stories. But there is one sort of turnaround I'll buy into -- the one where members of the fix-it squad bet a ton of their own wealth on success. Such management teams are usually motivated to deliver excellent returns to shareholders.
That brings me to Allied Capital. A disappointing third-quarter earnings report proved that its problems with Business Loan Express, which came to light in March, could persist for a while. Investors apparently didn't want to hear that; the stock is down nearly 13% since Halloween.
But here's the thing: 10 different insiders have bought stock in Allied since Friday, including CEO William Walton, who added 50,000 shares at $22.83 apiece, boosting his direct stake by 6%.
The last time I saw buying like this -- with consumer durables firm Chattem
I won't make that mistake again. Allied Capital joins 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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