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 10/2/07

Total Value
Purchased

52-Week Change

Beacon Roofing Supply (NASDAQ:BECN)

$10.69

$99,928

(45.9%)

CMGI (NASDAQ:CMGI)

$1.37

$207,995

28.0%

Gray Television (NYSE:GTN)

$9.40

$175,000

50.6%

Pep Boys - Manny, Moe, & Jack (NYSE:PBY)

$15.66

$5,739,564

14.6%

Pier 1 Imports (NYSE:PIR)

$5.42

$503,129

(28.7%)

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

How far the housing bust goes
If you're the nervous type who's so afraid of fallout from the housing bust you've moved into an apartment, believe me, you're not alone. But isn't it possible that investors' aversion to all things housing is being taken to an extreme?

Possibly. Witness Beacon Roofing Supply. For the 65,000-strong Motley Fool CAPS community, the stock is like lima beans to a toddler:

Metric

Beacon Roofing

CAPS stars (5 max)

**

Total ratings

34

Bullish ratings

27

Bull ratio

79.4%

Bearish ratings

7

Bear ratio

20.6%

Bullish pitches

4

Bearish pitches

2

Note: data current as of Oct. 3, 2007.

I'm not so sure that's fair, but let's start with the bad anyway.

Beacon is principally a wholesaler. Its 12 regional companies stretch across 34 states and three Canadian provinces. Its products include standard roofing supplies: tile, slate, shingles, as well as siding, windows, and decking.

As necessary as those items are when it comes to building a home, the data says we'll be building a lot fewer homes in the next year or two. Surely that's going to hurt Beacon. It did during the third quarter. Even though revenue was up 19%, net income fell more than 30%. How could anyone love a company like that?

Ask the insiders. They've been buying shares for months and, with the downturn, their faith has increased. Form 4 Oracle reports that, from April to July, executives and board members sold some $4.92 million in stock. But from July to October, they've spent nearly $400,000 to buy shares.

Directors Wilson Sexton and Stuart Randle crashed the purchased party last week. They combined to buy 10,000 shares last Wednesday and Thursday.

What do these and other insiders see? Valuation could play a part. By Wall Street's estimates, Beacon Roofing trades for 14.6 times next year's earnings, resulting in a potentially cheap 1.00 PEG ratio.

"Potentially" is the key word here, however. As much as its valuation and heavy insider buying intrigue me, there's every reason to believe that housing will become worse than perma-grin cheerleaders like Countrywide (NYSE: CFC  ) say it will be, and that's bad news for Beacon. Lower prices could still be ahead. Add this stock to your watch list, and then pounce when the bargain price becomes irresistible.

Nothing to see here
At this point I normally give you a second stock worth considering. CMGI almost made the cut. Almost.

It's not for a lack of buying. Chief Financial Officer Steven Crane and marketing chief Scott Smith added 140,000 shares on Friday, between $1.38 and $1.40 each. That's hardly chump change.

But CMGI isn't growing, has horrible (if improving) returns on capital, and an anemic 11% gross margin. By contrast, nanotech financier and Rule Breakers pick Harris & Harris (Nasdaq: TINY  ) sports a gross margin of more than 90%.

So, even if the insider buying at CMGI is interesting, there's just not enough of a business case here to justify an investment. I'm not sure there ever will be.

And that's your update. 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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