Stocks the Rich Executives Are Buying

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 today.

The week's buying

Company

Closing Price 9/18/08

Total Value Purchased

52-Week Change

Allscripts Health care (Nasdaq: MDRX  )

$11.78

$96,294

(56.6%)

EnergySolutions (NYSE: ES  )

$15.25

$6,144,660

(33.5%)*

National Oilwell Varco (NYSE: NOV  )

$52.73

$474,687

(22.2%)

Prospect Capital (Nasdaq: PSEC  )

$12.85

$348,530

(19.2%)

U.S. Global Investors (Nasdaq: GROW  )

$8.36

$47,587

(54.7%)

Sources: Fool.com, Yahoo! Finance, Form 4 Oracle, SEC filings.  *Change from Nov. 29, 2007 IPO.

Prospecting for capital
Nothing beats the feeling of seeing your stock spiffy-pop into a daybagger. But watching insiders bet right alongside you, with fresh capital, is a spine-tingler all its own; you just feel that outstanding returns will follow.

At least that's my take when it comes to Prospect Capital, an energy investor that Foolish colleague Jim Gillies singled out months ago in the pages of Motley Fool Hidden Gems Pay Dirt. Quoting from his original pitch:

The company's deal volume has ballooned amid all the weeping and gnashing of teeth -- companies still need financing, and where the banks might be skittish, Prospect is not. It also prudently manages its debt investments and borrowings, limiting losses through a careful use of fixed rates, floating rates, and floors.

Or in simpler terms: Prospect is positioned to profit tomorrow from today's panic. I like the sound of that. So does our 115,000-strong (and growing) Motley Fool CAPS community:

Metric

Prospect Capital

CAPS stars (5 max)

****

Total ratings

321

Bullish ratings

311

Percent Bulls

96.9%

Bearish ratings

10

Percent Bears

3.1%

Bullish pitches

57

Bearish pitches

2

Note: data current as of September 18, 2008.

"As the financial markets begin to feel the bottom, this stock will out pace the field in its area of expertise," wrote CAPS investor okeananavy in July. "It will outperform based not on share price alone, but on the combination of share price and a steady dividend yield of 12-13%. Even if this stock remains relatively flat for a couple quarters, the dividends will make the wait worth while."

For my part, I also like that Prospect has hiked its dividend for 16 consecutive quarters and that its portfolio is a model of diversification. Prospect holds senior secured notes in retailer Deb Shops and Peerless Manufacturing (Nasdaq: PMFG  ) ; each pays double-digit interest rates.

Executives also seem fond of these deals. CEO John Barry and three of his board members have bought shares in the past week. Combined, they've committed nearly $350,000 in personal wealth.

If there's a downside to Prospect Capital, it's in its use of leverage; now is a dangerous time to be tapping the debt markets. And yet this isn't American International Group (NYSE: AIG  ) we're talking about. Prospect's total debt-to-equity is a very reasonable 21% versus north of 200% for the troubled insurer.

Go, go, global investors
If great investors like Warren Buffett buy when others sell then it may be time to pay attention to U.S. Global Investors. CEO Frank Holmes has been accumulating shares since May, when the stock traded for nearly 40% more than yesterday's close.

CAPS investor COMOInvestments offered a thesis for Holmes' buying in August: "Beautiful balance sheet including no long term debt with a stable full of top performing funds make this a compelling mid to long term investment."

Agreed. Overall, the family of U.S. Global Investors funds has a history of trouncing category peers. And as a business, its 29.5% return on invested capital indicates excellent management. I'll be adding the stock to 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.

Get the inside scoop on stocks of all sizes with related Foolishness:

Get all the inside information you need in our collection of investing newsletters. From wallflowerish small caps to swashbuckling Rule Breakers we've got something for every investor. Get in on the action today; all of our newsletters offer a 30-day risk-free trial. All you have to lose is the prospect of better returns.

Fool contributor Tim Beyers, who is ranked 19,735 out of more than 115,000 participants in CAPS, also writes for Rule Breakers. Get access to all of Tim's Foolish writings here.

Tim owned shares of Prospect Capital, which is a Hidden Gems Pay Dirt recommendation, at the time of publication. The Motley Fool has a disclosure policy.


Read/Post Comments (1) | Recommend This Article (6)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 23, 2008, at 11:46 AM, drywit wrote:

    RE: PSEC

    What if its insiders are all Hidden Gems subscribers, hmmm?

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 732480, ~/Articles/ArticleHandler.aspx, 9/20/2014 8:24:07 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Apple's next smart device (warning, it may shock you

Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early-in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!


Advertisement