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 4/18/06

Total Value of Stock Purchased

52-Week Change

CardioDynamics (Nasdaq: CDIC  )

$1.42

$111,744

(47%)

Synergetics (Nasdaq: SURG  )

$7.59

$46,960

52%

Titanium Metals (NYSE: TIE  )

$59.18

$2,489,130

663%*

Urstadt BiddleProperties (NYSE: UBP  )

$16.99

$357,062

15%

York Water (Nasdaq: YORW  )

$25.88

$18,171

24%*

Sources: Fool.com, Yahoo! Finance, Form 4 Oracle, SEC filings.
*Returns adjusted to reflect the impact of dividends and/or splits.

A pulse at CardioDynamics?
Allow me to begin with a short story. It was about 18 months ago that I was on a plane home from a brief trip to Vegas when I met a salesperson from CardioDynamics, a company whose monitoring systems were being proposed to help in the battle against heart disease. The story was promising: major problem, interesting solution, heady sales growth. No wonder the stock had become a Motley Fool Hidden Gems recommendation, I thought.

Fast-forward to now. Growth has stalled, and Hidden Gems advisor Tom Gardner has admitted that the original valuation of the company was a bit on the optimistic side, leading to a 46% loss in just over a year. (Ouch.) Accordingly, CardioDynamics is no longer an active recommendation of the service.

But the story doesn't end there. It turns out that on April 11, CardioDynamics sold $5.25 million worth of convertible notes to its largest institutional shareholder, Balyasny Asset Management. It's a remarkably good deal for the hedge fund manager: The notes offer 8% interest annually through to 2009 and convert at a fixed price of $1.15 per stub -- a penny below last Tuesday's $1.16-per-share closing price.

Here's why that matters: Management's buying came after the deal closed, and at much higher prices. For example, CEO Michael Perry bought 15,000 shares at $1.25 per stub on Monday. Chairman James Gilstrap paid more than $50,000 for 40,000 shares the same day. Five other officers and directors bought between last Thursday and Monday, according to filings with the Securities and Exchange Commission.

The hope, it seems, is that recent good news, coupled with the additional funding, will allow CardioDynamics to generate outsized returns in future quarters. That may be a stretch. After all, CardioDynamics has never had a problem proving its technology works. Its problem has been turning that technology into big wads of moola. Additional funding may do exactly nothing to change that. Tread carefully, Fool, tread carefully.

When management knows how to invest
In February, I had the pleasure of hearing Stocks for the Long Run author Jeremy Siegel speak. In his talk, he revealed research that proves unequivocally that reinvesting dividends in good stocks crushes the market over the course of decades. So it must be quite Foolish to ride the investing bus with those who put their payouts to work, right? That certainly seems to be the case with local Pennsylvania utility York Water.

A spokesperson at the 190-year-old (!) water distributor told me this morning that company executives routinely reinvest dividends awarded each quarter. For the April quarter, the payout was $0.168 per share, and eight different officers and directors bought more shares with their proceeds. CEO Jeffrey Osman has been one of the biggest benefactors -- he recently bought more than 300 shares. It's also worth noting that this strategy has, um, paid dividends for Osman, as he's had a string of double-digit returns since the summer of 2004. Nice.

It's also worth noting that York Water has a fee-free dividend reinvestment program that allows any shareholder to buy stock for 95% of the open-market purchase price. There's some maneuvering required to get started, but this document (opens a pdf file) spells it all out nicely. (For more on dividend-reinvestment plans in general, visit our Fool's School, or ask us for an all-access pass to Motley Fool Income Investor. It's free for 30 days.)

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

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Fool contributorTim Beyersusually favors two scoops of ice cream over the inside scoop. Tim didn't own shares in any of the companies mentioned in this story at the time of publication. You can find out what's in his portfolio by checking Tim's Foolprofile. The Motley Fool has an ironcladdisclosure policy.


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