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


Closing Price 3/19/08

Total Value Purchased

52-Week Return





Redwood Trust (NYSE:RWT)




Sara Lee (NYSE:SLE)








White Mountains Insurance (NYSE:WTM)




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

Trustworthy the second time around?
When you're wrong, you're wrong. And I've been wrong more than a few times.

Rewind to last May with me. That's when, in this very column, I deemed cheap the shares of Northern California's Redwood Trust, a real estate investor and financier that's shed more than 35% of its value. Quoting:

From 2001 to 2006, Redwood has increased its common dividend by an average of 4.8% annually. Add to that Redwood's current yield of 6%, and it appears that the insiders buying today could take home a 10.8% annual return, and perhaps a lot more. (Redwood Trust has paid special dividends every year.)

The math has changed some since then. Redwood's common dividend growth rate has slipped to 3.6% annually over the past five years, for instance. And yet, with a current 9.5% yield, the potential for excellent long-term returns remains intact -- at least 13% by my math, assuming the dividend continues to grow at that rate.

And don't forget about those special dividends. Redwood has distributed at least $2 a share in bonus payments each year since 2003. Including them, dividends are up more than 11.6% annually over the past five years.

Still, our 89,000-person-strong Motley Fool CAPS community has mixed feelings:


Redwood Trust

CAPS stars (5 max)


Total ratings


Bullish ratings


Percent Bulls


Bearish ratings


Percent Bears


Bullish pitches


Bearish pitches


Data as of March 20, 2008.

Lee Fritz, known in these parts as TMFBBQPorkMogul, best expresses the bullish view. Quoting from his pitch of last December:

Well-financed, conservative management. Exposure to lousy mortgages should be minimal, at least relative to the more aggressive hosers in this space. Should at least do 15% growth per year, including dividends, for at least 5 years.

What Lee doesn't address is what effects, if any, Redwood Trust would see as a result of subprime exposure. Let's check the 10-K annual report, issued earlier this month, for details:

In 2007, as a result of market conditions, we significantly reduced our level of acquisitions of residential and commercial CES [credit-enhancement securities]. In total, at December 31, 2007, we owned residential, commercial, and CDO CES with a principal value of $2.5 billion and a market value of $749 million. Many of these securities are deep discount securities where our cost is far less than the principal value. Since we receive interest payments based on the principal value of a CES security, our interest income cash flow returns are strong. In addition, if credit losses are low, we will receive principal payments in excess of our cost basis, thus generating additional investment returns.

Sound good? It does to me -- and apparently, to insiders. Two of them, including CEO George Bell, have spent more than half a million dollars to acquire shares of Redwood Trust over the past week. Color me convinced; Redwood Trust joins my CAPS watch list today.

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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