You're Not the Only One Buying Here

Famed money manager Peter Lynch gave us the inside scoop on how to look at insider transactions. Executives can sell their stock for any reason, he said, but they only buy for one: They think the price is going to go up!

Today, I've highlighted a handful of insiders who have made big purchases of their own company's stock in the past week. These aren't executives getting big chunks of shares from option grants. Rather, they're insiders putting their own money on the line, buying shares at market prices. I then paired that information with insights from the members of Motley Fool CAPS to see if they think the stock has the same prospects the insiders do.

Stock

Insider, Position

Market Value of Transactions

CAPS Rating
(out of 5)

Calix Networks (Nasdaq: CALX  )

Donald Listwin, director

$1.05 million

***

General Motors (NYSE: GM  )

Daniel Akerson, CEO

$0.94 million

**

ION Geophysical (NYSE: IO  )

James Lapeyre, director

$0.59 million

****

Source: wsj.com; Motley Fool CAPS

Although following the lead of insiders can be profitable, we still recommend you do further due diligence to determine whether these stocks ought to be sold from your own portfolio -- or would make a good addition! So this isn't a list of stocks to sell or buy, but just the inside track on companies you might want to check out further.

Will the good times last?
After seeing your company's stock double in value over the past year, putting $1 million of your money into it at this point, as one of Calix Networks' directors did, would seem to be a pretty big vote of confidence in its future.

Certainly its earnings report last month underscored why it's been a winning investment. Sales of its broadband access equipment jumped 48% in the first quarter, although it also recorded losses of $0.55 a share as a result of acquiring Occam Networks. And though acquisitions like this will be a part of Calix's playbook going forward, partnerships figure into the equation too.

A few years ago, it inked a resale and integration agreement with Sonus Networks (Nasdaq: SONS  ) to replace Bahamas Telecom's infrastructure, a deal that just played a big role in Sonus's earnings report. And Calix is in a partnership with Fujitsu and Juniper Networks (NYSE: JNPR  ) that will build the infrastructure for broadband and advanced data services in southern and eastern Ohio. But for me, that's where this becomes a tale of caution for me.

The project is being funded through the federal government's stimulus spending plan. In fact, Calix has a fairly large short-term opportunity based on stimulus funds. In all, some $7.2 billion was appropriated for broadband projects, and all funds need to be spent by September 2013. Thus Calix has a very definite window to take advantage of stimulus funds before they're gone.

The broadband equipment maker is still flying below the radar of many investors, and 90% of the few dozen CAPS members rating it believe it can beat the market indexes. But let us know on the Calix Networks CAPS page if it will be able to broaden its business even though the clock is ticking.

What did I just pay for?
They tell you emotions and investing don't mix, and generally I try to keep my feelings aside the best as I'm able, but when it comes to General Motors, I'm as emotional as a daytime soap opera starlet. Its bailout by the government was the beginning of my distress. Having to have Ford (NYSE: F  ) fight a competitive battle with one hand tied behind its back had me rooting for it to upbraid Government Motors. And the fact that the taxpayers have likely lost a huge chunk of change in their "investment" is galling as well.

The latest tidbit that has me rooting against the automaker is the report that the carmaker's Chinese joint venture with state-owned Shanghai Automotive Industry Corp. is funding a movie celebrating the 90th anniversary of the founding of China's Communist Party. Sure, GM expects China to be a big part of its sales future, but as I see it, what was once a paragon of free market capitalism is now kowtowing to communists after itself becoming a ward of the state.

CAPS member TMFSamstevens is only a little less emotional than I am, but he still sees GM as having turned the corner, and rather than a game of one-upsmanship with Ford, sees the two profiting together.

But for real, I like GM's position with the Chevy Volt and their refocusing of models. I think its going to pay off in the long run. I would throw the numbers in the garbage on this one, but ... but according to Fool their balance sheet looks actually really good. If you make the assumption that long-term this one's turned a corner (I think it, along with Ford, has) then it's a huge bargain for a long-term pick.

With almost three quarters of the CAPS members rating GM thinking it will beat the market, it shows why I'll relegate myself to down-thumbing the automaker on CAPS and not shorting it in real life. But while I'm too emotional to invest with a level head, don't expect me to buy one of their cars. Ever. Still, add it to your watchlist to see if it will ever find its capitalist roots again.

Fighting the war
Oil-services giant Schlumberger (NYSE: SLB  ) forecast higher demand for oil, due to the turmoil in Libya. That doesn't seem to fit with the earnings results posted by seismic data acquisition specialist ION Geophysical, which disappointed the market. It had to cancel plans for millions of dollars worth of sales in the North African country because of the unrest. And while it was counting on oil staying above $100 a barrel, concerns about the U.S. economy have sent it below the century mark.

But ION is expecting the back half of the year to derive most of the benefits, and as CAPS member MOTV8 notes, when there's demand "Drillers need to know where to drill more."

Drill down for further insights on the ION Geophysical CAPS page and let us know whether the stock will make a second half recovery.

On the inside track
Following the insiders can be a path to profits, but it pays to start your own research on these stocks on Motley Fool CAPS. Read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made, all from a stock's CAPS page. Sign up today for the completely free service, and tell us whether its worth trading on this inside information.

The Motley Fool owns shares of Ford, ION Geophysical, and Schlumberger. Motley Fool newsletter services have recommended General Motors and Ford, along with a short position in Juniper Networks. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Fool contributor Rich Duprey does not have a financial position in any of the stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.


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