Stocks the Rich Executives Are Buying

Put five Fools in a room, ask them how they invest, and you'll probably get five different answers. Some like growth, others value, or small caps, or dividends, or, well, you get the picture.

Yet while our styles may differ, we all want excellent, engaged managers running the companies we own. We like it even more when these managers are also owners -- investors like you and me who, in trying times like these, are willing to buy as others sell. That's why I write this column weekly.

The week's buying
So which rich executives are buying now? Have a look, courtesy of our friends at Form 4 Oracle:

Company

Closing Price 10/7/08

Total Value Purchased

52-Week Change

Diamond Foods (Nasdaq: DMND  )

$29.42

$247,537

47.4%

Discover Financial Services (NYSE: DFS  )

$9.74

$368,600

(57.0%)

Jabil Circuit (NYSE: JBL  )

$7.73

$85,700

(65.3%)

Titanium Metals (NYSE: TIE  )

$7.31

$933,237

(77.9%)

Walter Industries (NYSE: WLT  )

$32.78

$1,395,015

13.0%

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

Bolting titanium to your portfolio
Few of us long-term investors have truly outstanding timing, especially yours truly. But I'm not alone. David Gardner recommended Titanium Metals to Stock Advisor subscribers recently and has seen the stock backslide by more than 30%. (The S&P is down just under 23% over the same period.)

The good news? Timing isn't all that important if your intent is to hold for at least three to five years, or, better still, longer. And there are few stocks our 115,000-strong Motley Fool CAPS community likes for the long haul more than Titanium Metals (Timet):

Metric

Titanium Metals

CAPS stars (5 max)

*****

Total ratings

1,831

Bullish ratings

1,771

Percent Bulls

96.7%

Bearish ratings

60

Percent Bears

3.3%

Bullish pitches

288

Bearish pitches

10

Note: Data current as of Oct. 8, 2008.

Bulls like David point to titanium's usefulness in commercial applications. Quoting from his original write-up:

Supremely corrosion-resistant and sporting the highest strength-to-weight ratio of any metal, titanium isn't just a key component of stratosphere-ready exoskeletons. It's a crucial commodity for the aerospace industry, where it's used to make aircraft frames, engines, and supports. It's also used in cars, prosthetic limbs, and deep-sea oil and gas drilling platforms.

Trouble is, Timet isn't the only company that extracts and processes titanium. So do Russia's VSMPO-Avisma, RTI International (NYSE: RTI  ) , and Allegheny Technologies (NYSE: ATI  ) . What's so special about Timet?

Insiders. Both Simmons brothers -- company chairman Harold and director Glenn -- have been buying in bulk. And it wasn't that long ago that board member and professional investor Terry Worrell was buying.

Also interesting is Timet's extremely strong capital position; debt accounts for less than 2% of total capital, according to Capital IQ. Neither Allegheny nor RTI can match that.

And it's a huge asset generally: With a credit crunch upon us, Timet is still able to fund growth via free cash flow -- $88 million worth over the trailing 12 months alone. That's far too rare right now. Thus, Timet, trading for a very reasonable seven times earnings, joins my ailing CAPS portfolio today.

Where's Walter?
Interestingly, the insiders seem to have been pretty prescient on this one. Three separate executives were selling above -- wait for it -- $80 per share in May. Now, one of them is buying: Chief Financial Officer Victor Patrick, at $40.55 a share. I'd like to see his peers join him before adding a position in CAPS, but history says it's worth adding Walter to my watch list.

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.

On Oct. 7, 2008, Fool co-founder David Gardner and his Motley Fool Pro invested $1 million in a portfolio designed to help you make money in any market. In the coming weeks, the team, relying heavily on proprietary CAPS "community intelligence" data, will establish long and short positions in a broad range of securities, including common stocks, publicly traded put and call options, and exchange-traded funds (ETFs). To learn more about Motley Fool Pro and to receive a private invitation to join, simply enter your email address in the box below.

Fool contributor Tim Beyers, thanks to the market meltdown, is ranked near the bottom in CAPS. He also writes for Rule Breakers. Get access to all of Tim's Foolish writings here.

Tim didn't own shares in any of the companies mentioned in this article at the time of publication. Discover Financial Services is an Inside Value pick. The Motley Fool has a disclosure policy.


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  • Report this Comment On October 09, 2008, at 9:22 PM, bizcardnut64 wrote:

    It's a shame no one out there will read this article and buy the stock. Seems the only ones buying the stock are insiders. I foresee another 10%+ drop on Friday.

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