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 from the past seven days:

The week's buying

Company

Closing price 1/24/07

Total value of stock purchased

52-week change

Cantel Medical (NYSE: CMN  )

$16.49

$80,150

(2%)

Consolidated-Tomoka Land (AMEX: CTO  )

$78.75

$656,684

17%

Home Bancshares (Nasdaq: HOMB  )

$24.17

$47,715

21%*

Intervoice (Nasdaq: INTV  )

$6.65

$32,950

(25%)

Omnova Solutions (NYSE: OMN  )

$6.16

$5,930

15%

Sources: Fool.com, Yahoo! Finance, Form 4 Oracle, SEC filings
* Home Bancshares began trading on June 23, 2006.

Consolidation at Consolidated-Tomoka
Readers of this column know that I prefer firms where executives are buying. That's not what we have with 105-year-old Florida developer Consolidated-Tomoka. Chairman Bob Allen sold almost 40,000 shares in October. CEO William McMunn sold 5,000 shares in November.

Who's buying? David Winters. One of my favorite up-and-coming fund managers, Winters is captain of Wintergreen Advisers and steers the Wintergreen Fund, which he started in October of 2005.

He's built a 16% position in Consolidated-Tomoka since, including 8,800 shares acquired over the past seven days. I like his thesis. From the Wintergreen Fund's semi-annual report, released last June:

"CTO's assets are substantial land holdings located primarily in Volusia County, Florida, which is home to Daytona Beach ... A review of real estate prices in the Daytona area over the last few years shows that there have been substantial increases, and yet in comparison to many other areas on the east coast of Florida, Daytona remains much more affordable. This is significant in light of the fact that Florida is one of the states with the fastest growing populations." [Emphasis mine.]

Winters goes on to write that his strategy with Wintergreen is to create a portfolio of "gorgeous pearls hiding in unglamorous oyster shells." The Fools following this stock in our Motley Fool CAPS investor-intelligence database seem to think that's exactly what they've found in Consolidated-Tomoka:

Metric

CTO

CAPS stars (out of five)

*****

Total ratings

24

Bullish ratings

23

Bull ratio

95.8%

Bearish ratings

1

Bear ratio

4.2%

Bullish pitches

6

Bearish pitches

0

Data current as of Jan. 24, 2007.

Fellow Fool Jim Gillies, known as TMFCanuck around here, sums up the bullish sentiment best:

"[Consolidated-Tomoka] has signed [a] deal to 'allow' 5 thoroughfares through their land, and have the right (which I believe they'll take) to pre-construct, and be completely reimbursed by the County. Management characterizes this agreement as 'beneficial to future development.' No kidding."

Equally interesting to me is that there are zero analysts following Consolidated-Tomoka. Without coverage, there's ample opportunity for the stock to be mispriced by the market, leading to huge gains for shareholders. (Just ask Bill Mann and Tom Gardner. Underfollowed firms buttress the Hidden Gems portfolio, which is beating the market by more than 25% as I write. Click here to try the service free for 30 days.)

Winters' buying is merely icing on the cake. I'll be adding Consolidated-Tomoka to my CAPS watch list today.

Selling Cantel
Sometimes, insider buying isn't enough. That's how it was with infection fighter Cantel Medical, a former Hidden Gems selection.

When I profiled the stock in this column on Oct. 18, my thesis was that the purchases indicated faith in the underlying business:

"Cantel is ... benefiting from lots of insider buying. Over the last week, five insiders have picked up shares for between $12.69 and $12.83 a stub. Cantel's stock trades for $13.24 as I write."

But I also offered a mild warning:

"What gives? Frankly, that's hard to say. Fourth-quarter earnings were by no means spectacular, and competition remains fierce in all of its markets. We're left with management optimism as the only bullish indicator. Could that really be enough? Don't be too sure."

CFO Craig Sheldon sold 61% of his direct holdings the same day. Tom Gardner would recommend selling Cantel a month later.

Now that it's January, new CEO Scott Jones is buying. He purchased 5,000 shares on the open market on Friday. I'd call that bullish if other executives weren't selling. All told, Cantel officers have dumped $1.28 million worth of stock over the past 52 weeks, according to Form 4 Oracle.

And what of positive business developments? Cantel announced in early December that first-quarter sales had climbed by 6%. Investors cheered the news then, but that doesn't explain Jones' buying. There's been no other news, other than his joining the company, since.

So why is Jones buying? Probably because, as the new CEO, he should have skin in the game. (His options and restricted stock won't begin to vest before next year.)

Besides, while his $80,000 purchase is impressive, Cantel guaranteed Jones $900,000 in salary and bonus during 2007. He can afford to take one for the team.

I'm rooting for a turnaround at Cantel, but, as Tom wrote in November, there's simply not enough evidence of higher returns ahead to justify a spot for the stock in any of my portfolios.

That's all for now. See you back here next week, when we dig through more insider deals in search of the next home run stock.

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Fool contributor Tim Beyers, ranked 759 out of more than 20,700 in Motley Fool CAPS, usually favors two scoops of ice cream over the inside scoop. Tim didn't own stock in any of the companies mentioned in this story at the time of publication. Get the skinny on all of the stocks in his portfolio by checking Tim's Fool profile. The Motley Fool's disclosure policy is a strong buy.


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