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 8/14/07

Total Value Purchased

52-Week Change

American Express (NYSE: AXP  )

$57.30

$3,923,891

9%

Brookfield Homes (NYSE: BHS  )

$19.15

$3,718,794

(29%)

CBRE Realty Finance* (NYSE: CBF  )

$4.78

$2,107,144

(67%)

Cenveo
(NYSE: CVO  )

$18.46

$1,904,696

(10%)

Innospec (Nasdaq: IOSP  )

$21.33

$6,818,526

69%

Sources: Fool.com, Yahoo! Finance, Form 4 Oracle, SEC filings.
*CBRE Realty Finance began trading on Sept. 28, 2006.

What? A meltdown? What meltdown?
Something isn't right. Either insiders -- and some of the best investors I know -- are about to lose a fortune, or those who are aggressively shorting finance and real estate stocks are due for a comeuppance.

And when I say "a fortune," I'm not talking about cookies. Insiders bought as much stock during the first 10 days of August as they did during the entire month of July, reports Thomson Financial. Financiers and mortgage-backed REITs both ranked among the top five sectors for insider activity.

How could that be? Just this morning, the National Association of Realtors, which has a reputation for putting a happy face on awful news, admitted that existing home sales declined by nearly 11% in the second quarter. Median home prices also declined.

Yet insiders remain undaunted, including those leading today's subjects: Brookfield Homes, a residential builder, and CBRE Realty, a mortgage financier. Neither gets good ratings in our Motley Fool CAPS investor-intelligence database:

Metric

Brookfield

CBRE Realty

CAPS stars (5 max)

*

*

Total ratings

185

70

Bullish ratings

46

30

Bull ratio

24.9%

42.9%

Bearish ratings

139

40

Bear ratio

75.1%

57.1%

Bullish pitches

7

9

Bearish pitches

16

7

Note: data current as of Aug. 15, 2007.

Bubbling Brookfield
The argument against homebuilders is obvious. If a credit crunch dries up liquidity, marginal consumers -- that is, the ones who helped to drive up prices in the first place -- won't be able to afford new homes. Bummer for the builders.

But don't tell that to TMFEldrehad, one of our top CAPS players. He recently rated Brookfield, a California builder that also has land in the Washington, D.C., area, to outperform the market over the next five years. Here's a sample of his reasoning:

Truth is I think that this sector will eventually turn around. People will continue to need places to live, and population expansion will demand that new homes be built.

Brookfield CEO Ian Cockwell seems to agree. He's spent more than $7.6 million to pad his position over the past 52 weeks. His last buy came on Aug. 3, for 75,000 shares.

Cockwell isn't the only one. Last Monday, director Robert Stelzl bought in when Brookfield was selling for $17.87 a stub.

I hope they're right, but I'm still skeptical -- if only because Brookfield's much-hyped second-quarter profit didn't translate into positive cash flow. I'd rather see Brookfield earning, rather than burning, cash before buying shares.

Will you see CBRE?
CBRE, too, seems to be in a tough spot. And that's troubling. CRBE, you see, is a commercial lender. That it has experienced margin calls from credit partner Wachovia (NYSE: WB  ) indicates that a credit crunch is indeed underway.

As a result, CBRE revealed in its latest quarterly filing that it isn't likely to obtain capital from either the equity or debt markets over the next quarter. Management has temporarily halted lending as a result.

If that all sounds really awful, it's because it is. But management seems to believe these problems will pass. Interim CEO Raymond Wirta added 60,000 shares to his portfolio this week alone. He's been on a buying spree since March.

Actually, that's not right: Wirta's buying has been on behalf of his family trust. Either he's about to put them all in the poorhouse, or he's got excellent reasons to believe in the inevitability of a turnaround.

Perhaps he's right. But if he's wrong, he won't be the first. William Freidman, CEO of real estate developer Tarragon (Nasdaq: TARR  ) , had spent more than $1 million acquiring shares of his company from the summer of 2005 to the summer of 2006. Then the market turned south. He's dumped more than $5 million worth of stock since.

The moral? Don't follow these guys blindly. Any of them could be blindfolded.

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, who is ranked 6,465 out of more than 60,000 participants in CAPS, didn't own stock in any of the companies mentioned in this article at the time of publication. Find Tim's portfolio here and his latest blog commentary here. The Motley Fool has a disclosure policy.


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