Stocks the Rich Executives Are Buying

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 9/23/08

Total Value Purchased

52-Week Return

Conseco (NYSE: CNO  )

$5.63

$1,516,798

(63.8%)

Landry's (NYSE: LNY  )

$14.70

$4,925,097

(47.6%)

Lululemon Athletica (Nasdaq: LULU  )

$23.33

($5,906,549)

(40.7%)

MVC Capital (NYSE: MVC  )

$15.19

$279,990

(12.9%)

Prospect Capital (Nasdaq: PSEC  )

$12.98

$1,459

(16.5%)

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

No cap on MVC Capital
You know when stock-picking matters most? Now. When the bear claws and bites your portfolio till it bleeds a deep, ugly shade of red. But that doesn't necessarily mean that you need to be picking stocks. Sometimes it's enough to own the best stock pickers.

Welcome to week 2 of our look at asset managers. This time, Prospect Capital, a Hidden Gems Pay Dirt pick, gives way to MVC Capital, a member of the more senior and better-performing Hidden Gems service. The stock has a very strong following in our 115,000-strong Motley Fool CAPS community:

Metric

MVC Capital

CAPS stars (5 max)

****

Total ratings

851

Bullish ratings

841

Percent Bulls

98.8%

Bearish ratings

10

Percent Bears

1.2%

Bullish pitches

93

Bearish pitches

1

Data current as of Sept. 23, 2008.

Discount prices will do that. The net asset value (NAV) of MVC's portfolio, $17.19 per share as of Aug. 31, is up 14.2% over the past year. Shares of the common stock, which trade for a 12% discount to NAV at present, are down nearly that much over the same period. Crazy.

"As the market begins to slowly awaken from this un-nerving experience, there is still real business being conducted on Wall Street and that takes Money," wrote CAPS investor Budsworth in May. "Companies like MVC help to keep many of these businesses in the green-backs so they can keep their doors open and their show-rooms full of inventory."

Agreed. And yet net asset value isn't a concrete number. Rather, it is the estimated per-share market value of all securities and cash held after subtracting liabilities. Here, the danger is that MVC's valuations of its illiquid securities held -- positions in privately held companies -- are too aggressive. Nanotech venture capitalist Harris & Harris (Nasdaq: TINY  ) faces the same problem. But asset managers that routinely overestimate the worth of their investments usually don't get very far, and MVC has been in business since 1999.

To look at management's commitment is to wonder whether MVC's opportunity has ever been richer. Chairman Michael Tokarz and director Robert Knapp, combined, have bought nearly $280,000 in shares over the past week. I think they've got it right; MVC joins my CAPS portfolio today.

Yoo hoo, Lulu
When my wife and I visited a local Lululemon store this weekend, we weren't impressed. Neither the staff (who were wonderful) nor the selection (which was also strong) was the problem. The store was just ... empty. Not what an owner like me enjoys seeing.

I feel somewhat better today because new CEO Christine Day is buying. She added 4,000 shares to her position on Monday. Unfortunately, she's the only one. Founder Chip Wilson sold more than $6 million worth of stock last week. Chief Financial Officer John Currie just cashed in $1.3 million worth of shares acquired via options.

The combination is disheartening and I'm weighing a sell. That doesn't mean I've soured on the business completely; retail niches can be extremely profitable and, to me, Lululemon is Urban Outfitters (Nasdaq: URBN  ) for the terminally athletic. I'd just like the stock a lot more if Day weren't out on a ledge, and if more customers were shopping at her stores. You're on notice, Lulu.

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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Fool contributor Tim Beyers, who is ranked 21,827 out of more than 115,000 participants in CAPS, also writes for Rule Breakers, which counts Harris & Harris among its holdings. Get access to all of Tim's Foolish writings here.

Tim owned shares of Harris & Harris, Lululemon Athletica, and Prospect Capital, which is a Hidden Gems Pay Dirt recommendation, at the time of publication. MVC Capital is a mere Hidden Gems pick. The Motley Fool has a disclosure policy.


Read/Post Comments (3) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 24, 2008, at 2:07 PM, Runningman0715 wrote:

    You need to do some more homework on lulu before you write your articles.

    You only visited one lulu store to see that it was empty. I've been to the store in many different locations, and they are usually always very busy. Especially in comparison with other retail stores.

    But, more importantly, check into the $6 million Chip "sold". These stocks were transferred to long serving employees and was a commitment he made long ago.

  • Report this Comment On September 24, 2008, at 3:42 PM, p4b wrote:

    I couldn't agree more with the prior posting. Going to one store? Come on. I've been to many and have never seen a store that wasn't busy. Never.

    Then, the insider sales. Okay. Not what you want to see. But, there are reasons for this, especially if owners want to take some off the table. I would and I bet you would too. Maybe they're building a house, estate planning, or something.

    Net net, would you make a decision on buying or selling a stock based on PE and EPS with no regard not enterprise value or technicals? Of course not. Weighing a sell based on 1 poor store visit combined with a few insider sales seems foolish in a non-Motley Fool'ish way.

  • Report this Comment On September 24, 2008, at 6:37 PM, TMFMileHigh wrote:

    Thanks for the comments. Fair points. Maybe I should clarify; I'm not selling but I am waffling. Thanks for the admonition to keep digging. Very Foolish.

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