Who's Buying Now?

It's time once again to check out the week's 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 7/3/06

Total Value of Stock Purchased

52-Week Change

Chesapeake Energy
(NYSE: CHK  )

$30.74

$11,619,999

20%

Hartmarx (NYSE: HMX  )

$6.04

$60,100

(40%)

Inergy (Nasdaq: NRGY  )

$25.68

$995,999

(18%)

Intervoice (Nasdaq: INTV  )

$7.19

$67,000

(16%)

Star Buffet (Nasdaq: STRZ  )

$8.05

$56,756

(8%)

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

Eat up
Star Buffet isn't exactly the kind of stock you'll see us Fools profile much. After all, it's a micro cap with a market value of roughly $24 million as I write. Such stocks are often subject to stomach-churning volatility, and they often possess none of the competitive advantages we'd like to see in a promising investment.

Still, it's sometimes worth breaking the rules, and I wonder whether this might be one of those times. Star, which operates 14 buffet-style restaurants throughout the U.S., trades well below industry multiples for earnings and sales. Last year, it reported its best return on equity since 2002, according to Capital IQ. It's also a Tiny Gems selection for Motley Fool Hidden Gems.

But it's drawing little attention. No analysts cover the company, which is to be expected with such a small company. Meanwhile, institutions own 9% of the outstanding shares, and the shorts are nowhere to be found; only 0.1% of the tradable stubs are sold short.

Regardless, CEO Robert Wheaton has been snapping up stock like a hungry patron. He's bought more than 10,000 shares of Star since the beginning of June. More than 7,300 of those were purchased last Tuesday at an average price of $7.70 a share.

I'm more intrigued that the vast majority of Wheaton's holdings are options to purchase more than 239,000 shares at $12 a stub. Unless he can convince investors that Star is worth much more than that, the options will expire worthlessly a year from September.

Finally, the restaurant operator sports a tasty 7.7% dividend yield that, according to my calculations, is fundable through free cash flow.

Insiders heart Hartmarx
Maybe I'm on a small-cap kick this week, but Hartmarx, a Chicago-based clothier, also stands out. Best known as a maker of tailored clothing, Hartmarx's stock has become very cheap, if you believe analysts' projections. They see earnings expanding by 35% next year, giving the company a forward P/E of 8.

But it's not as if analysts are, you know, accurate. Many times, they're wrong. Here, the risk is that Hartmarx won't be able to regain earnings momentum. Last week, the clothier said its second-quarter earnings fell by nearly 28%. And it reduced average full-year guidance by roughly $0.20 per share. Ouch.

CEO Homi Patel apparently considers the blip temporary -- he bought 10,000 stubs on the open market on Monday. Color me intrigued, but the lack of a dividend and the fickle uncertainty of fashion leaves me unconvinced this stock is a fit for my portfolio.

And that's all for this week. 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 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 is in his portfolio by checking Tim's Foolprofile. The Motley Fool has an ironcladdisclosure policy.


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