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 today.

The week's buying

Company

Closing Price 2/19/08

Total Value Purchased

52-Week Change

Align Technology (NASDAQ:ALGN)

$13.20

$3,882,137

(26.2%)

AutoNation (NYSE:AN)

$15.15

$29,530,866

(33.8%)

General Growth Properties (NYSE:GGP)

$35.29

$6,088,904

(44.2%)

OYO Geospace (NASDAQ:OYOG)

$48.19

$396,340

(32.1%)

Vertex Pharmaceuticals (NASDAQ:VRTX)

$17.80

$1,526,544

(43.3%)

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

Value in Vertex
Are you the bold sort who'll buy a growth stock as its in freefall? That's what we have with Vertex, a Motley Fool Rule Breakers pick; last year at this time, it was a three-bagger.

Not anymore. Though still a market-beater, Vertex is up just 67% since being recommended in the February 2005 issue. What's changed? Nothing. Management's strategy is perfectly intact, according to Foolish colleague Brian Lawler.

But investors haven't yet adjusted to the cost associated with executing that strategy. Research and development will consume as much as $520 million in 2008. Partner Johnson & Johnson (NYSE: JNJ  ) is expected to foot a portion of that bill, but not enough to keep Vertex from raising another $359 million from the capital markets.

Such is the nature of biotech investing. Dilution persists till the promise of a blockbuster drug is either (a) fulfilled or (b) not. Investors will have to wait till at least 2010 for a definitive answer, according to company filings.

Is the wait worth it? Our 83,000-strong Motley Fool CAPS community is undecided:

Metric

Vertex Pharmaceuticals

CAPS stars (5 max)

***

Total ratings

486

Bullish ratings

445

Percent Bulls

91.6%

Bearish ratings

41

Percent Bears

8.4%

Bullish pitches

95

Bearish pitches

5

Note: Data current as of Feb. 20, 2008.

To me, CAPS investor FutureMonkey best explained the dichotomy a week ago:

This is an all or none play on their phase III Hepatitis protease inhibitor therapy -- telaprevir. If this drug comes close to expectations [Vertex] at below $20 is a bargain. Yes, this company has other promising drugs in the pipeline; however the value of those products is offset by the risk of competition and a fickle FDA.

Plenty of potential. Plenty of room for doubt. No wonder investors are confused!

Well, most investors. Two Vertex directors put more than $1.5 million in personal wealth on the line this week. CEO Josh Boger, meanwhile, exercised 12,735 options last Tuesday, and chose to hold the underlying shares. (Typically, these sort of transactions result in immediate sales.)

In short: They're believers. So am I. Vertex joins my CAPS portfolio today.

Crazy Eddie?
When superinvestor Eddie Lampert was buying shares of AutoNation in November, I reasoned that management's steady hand in guiding the business pointed a bargain in the making.

So much for my thesis. AutoNation shares closed at $15.15 yesterday -- down 4% in three months. Yet Lampert won't stop buying. Since last Monday, he's committed more than $29 million to the stock. AutoNation board member Robert Grusky joined the buying spree on Friday.

That leaves just two possibilities. Lampert is either crazy ... or a brilliant bargain hunter. History points to the latter.

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.

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