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 11/20/07

Total Value Purchased

52-Week Stock Change

American Railcar Industries (NASDAQ:ARII)

$14.93

$4,938,851

(53.47%)

eLoyalty (NASDAQ:ELOY)

$12.64

$8,504,254

(29.78%)

NuStar Energy (NYSE:NS)

$57.03

$9,753,284

3.35%

Six Flags (NYSE:SIX)

$2.06

$2,323,388

(63.28%)

Wachovia (NYSE:WB)

$38.43

$24,982,231

(29.37%)

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

Whither Wachovia?
Each day, one of my oldest and closest friends sends me notes about how cheap banks have become. It's growing tiresome. Trouble is, he may have a point. (Don't get cocky, pal.)

Witness Wachovia. As with peers Citigroup (NYSE: C  ) , Morgan Stanley, and Merrill Lynch (NYSE: MER  ) , Wachovia has suffered deep writedowns in the value of debt on its books. (At least $1.1 billion as of this writing.)

But unlike at these banks, insiders at Wachovia are buying. In bulk. Here's a Fool's-eye view:

Bank

Net Buying,

Last 4 Weeks

Net Buying,

Last 52 Weeks

Citigroup

$0 mil

($3.65 mil)

Merrill Lynch

$0 mil

($51.59 mil)

Morgan Stanley

$0 mil

($14.71 mil)

Wachovia

$29.61 mil

$20.31 mil

Source: Form 4 Oracle.

What a difference, eh? Surely that counts for something -- we just don't yet know what. We don't know whether the current credit crisis poses as deep a threat to Wachovia as overcaffeinated, nail-biting, is-there-still-room-under-the-bed investors seem to think.

So let's focus on what we do know:

  • At 8.59 times trailing earnings, Wachovia trades at a discount to most peers and the banking industry as a whole.
  • Wachovia appears to have struck gold with its May pickup of broker A.G. Edwards.
  • Both CEO Ken Thompson and chief risk officer Donald Truslow have bought shares. So have three other board members. And that's just in the last week.

Yet few in our 74,000-strong Motley Fool CAPS community see a value here:

Metric

Wachovia

CAPS stars (5 max)

**

Total ratings

714

Bullish ratings

603

Bull ratio

84.5%

Bearish ratings

111

Bear ratio

15.5%

Bullish pitches

108

Bearish pitches

17

Data current as of Nov. 21, 2007.

Maybe they're right. Maybe the credit crisis isn't done with Wachovia. No doubt it's reached farther than most of us expected, especially those who held shares of E*Trade Financial.

Even so, it's hard to escape the disparity between Wachovia and its peers when it comes to insider buying. And it speaks volumes -- to me, at least -- that the guy in charge of measuring risk at Wachovia spies enough of a bargain in his company's stock that he's willing to spend more than a half-million dollars to buy more of it.

That can't be a coincidence, can it? Not as far as I'm concerned. Wachovia joins my CAPS portfolio today.

A lesson in buying quality
For perspective, let's contrast the insider buying at Wachovia with what's occurring at consultant eLoyalty.

Were you to simply look at the sheer volume of Form 4 filings for its stock, you'd likely conclude that eLoyalty is a screaming buy. Hundreds of thousands of dollars are being spent.

Here's the problem: Partners of Sutter Hill Ventures, a major institutional holder of the stock, are responsible for virtually all of that buying. Who else besides Sutter Hill -- which may have a very different agenda than the average investor -- is bullish on eLoyalty?

No one, apparently -- not even the firm's senior executives, if SEC filings can be believed. Chief Financial Officer Steven Pollema has been selling bite-sized chunks of stock since at least February. CEO Kelly Conway has been a buyer in the past, but sold as recently as September.

Anyone want to try calling that a bullish indicator? Yeah, me neither.

There's your update. See you back here next week, when we dig through more insider deals in search of the next home run stock. And to you and yours, a very Happy Thanksgiving.

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