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 12/6/07

Total Value Purchased

52-Week Change

Calgon Carbon (NYSE:CCC)

$16.40

$5,368,300

173.33%

Central Garden & Pet (NASDAQ:CENT)

$5.78

$5,458,575

(67.65%)

Cenveo (NYSE:CVO)

$21.13

$722,840

3.88%

Foot Locker (NYSE:FL)

$13.86

$1,532,878

(39.58%)

P.F. Chang's China Bistro (NASDAQ:PFCB)

$27.95

$624,298

(22.25%)

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

Anyone up for Chinese?
Whoever said Chinese stocks are all the rage doesn't own shares of P.F. Chang's China Bistro. Well, actually, that's not fair: P.F. Chang's is based in Scottsdale, not Shanghai. And its restaurants don't serve Chinese food so much as an emerging blend called Asian fusion.

So what can we say for certain when it comes to P.F. Chang's? Tables at its 300 eateries are emptier than investors would like. Earnings fell 20% in the company's third quarter, causing management to cut full-year guidance by $0.15 a share.

No wonder our 76,000-strong Motley Fool CAPS community finds the stock unappetizing:

Metric

P.F. Chang's

CAPS stars (out of 5)

**

Total ratings

122

Bullish ratings

87

Bull ratio

71.3%

Bearish ratings

35

Bear ratio

28.7%

Bullish pitches

18

Bearish pitches

5

Data current as of Dec. 6.

And it's getting worse. Since Nov. 1, 15 investors have rated P.F. Chang's in CAPS; seven of them are All-Stars, or stock pickers whose choices rank among the top 20% of the entire community. The majority of these Fools -- five, to be precise -- say P.F. Chang's will underperform the S&P 500.

But not everyone is a skeptic. Insiders have rarely bet bigger on the company then they are now. On Friday, company president Robert Vivian spent more than half a million dollars to acquire 20,000 shares. CEO Richard Federico has been a buyer since early November.

What do they see that others don't? Perhaps valuation has something to do with it. Here's how P.F. Chang's compares to its casual-dining peers:

Chain

Price-to-Sales

Current P/E

2008 PEG

Brinker International

0.52

12.06

0.90

Cheesecake Factory (NASDAQ:CAKE)

1.11

22.43

0.92

Darden Restaurants

0.97

26.31

1.08

P.F. Chang's

0.64

21.46

1.00

Ruth's Chris Steak House (NASDAQ:RUTH)

0.84

10.81

0.62

Sources: Yahoo! Finance; Capital IQ, a division of Standard & Poor's.

Hmmmm. Suddenly P.F. Chang's doesn't look so cheap. But don't rush to judgment. Here's a breakdown of the buying and selling activity at each chain over the past month:

Chain

Net Buying (Last 4 Weeks)

Brinker International

$0.00

Cheesecake Factory

($116,400)

Darden Restaurants

$0.00

P.F. Chang's

$624,298

Ruth's Chris Steak House

$68,378

Sources: Yahoo! Finance, Capital IQ.

P.F. Chang's may not be the cheapest of the lunch bunch, but it's the only one (other than Ruth's Chris) that insiders are buying. And it's the only one being bought in bunches.

Extracting value at Cenveo
Sometimes, it pays to follow insiders who are investors. Robert Burton of printing and forms specialist Cenveo is exactly that kind of insider.

Burton, founder of his own private equity firm, ascended to the CEO post in September of 2005 after successfully navigating a hostile takeover earlier that year. He's performed brilliantly since. Returns on capital at the company have more than doubled, and return on equity is now positive after years in the red.

Better still: He's profited right alongside common shareholders. Burton's average return on his Cenveo purchases is 30%, according to Form 4 Oracle. His earliest recorded purchase -- from May of 2005 -- is up more than 200%.

All of this tells us two things:

  1. Burton knows something about extracting value from Cenveo as a business.
  2. Burton is either extremely lucky (unlikely, since he's a professional investor), or he knows a bargain when he sees one.

No. 2 strikes me as far more likely. That's why I was intrigued to see him buying again last week. But he wasn't the only one. Chief financial officer Mark Hiltwein and board member Leonard Green, also a finance guy, were also buying. Color me convinced. Cenveo joins my CAPS portfolio today.

There's your update. See you back here next week, when we dig through more insider filings in search of the next home run stock.

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