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 11/7/06

Total value of stock purchased

52-week change

CBIZ (NYSE: CBZ  )

$6.95

$799

18%

Intervoice (Nasdaq: INTV  )

$6.19

$60,100

(31%)

Jefferies Group (NYSE: JEF  )

$29.49

$3,763,494

33%

Orthofix (Nasdaq: OFIX  )

$42.52

$239,995

10%

Ruth's Chris Steak House (Nasdaq: RUTH  )

$19.89

$364,000

13%

Sources: Fool.com, Yahoo! Finance, Form 4 Oracle, SEC filings
*Home Bancshares began trading on June 23, 2006

Cash speaks at Intervoice
I've singled out automated customer-service systems provider Intervoice many times in this column. Sadly, it's done little good. My first profile of the stock was at $7.31 a stub in April, when the shares were trading more than 15% higher than they are today. And yet Motley Fool CAPS players continue to view the company as an intriguing pick:

Metric

Intervoice

Total ratings

18

Bullish ratings

14

Bull ratio

77.8%

Bearish ratings

4

Bear ratio

22.2%

Bullish pitches

1

Bearish pitches

0

Source: Motley Fool CAPS

What's driving the interest? All-star performer platoish has an idea. Here's an excerpt from the pitch he made to his fellow Fools who are in the game:

Intervoice provides customer interface service platforms for the telecomm industry and other large enterprise applications ... [the] platforms go well beyond speech interfaces however, and offer sophisticated multi-media capabilities that companies use to provide a robust customer service interface ... Companies can immediately reap cost benefits through automation and the new generation of IVR capabilities can even enhance the customer experience over human interaction.

He concludes his remarks by pointing out that Intervoice, which competes with Motley Fool Hidden Gems pick Nuance Communications (Nasdaq: NUAN  ) , sports $32 million in cash with no debt.

Don't forget to add insider buying, Fool. Form 4 Oracle reports that, over the past 52 weeks, insiders have been net buyers of more than $480,000 worth of shares. Almost half of that can be credited to the company's chief operating officer, James Milton, who was buying again last Thursday.

But can this falling knife be caught without slaying your portfolio? Frankly, I have my doubts. Despite passionate pleas to the contrary, interactive voice response technology can be remarkably annoying. Just ask any traveler what he thinks about talking with a computer when booking reservations. Writer Paul English expertly captures the widespread frustration with this experience and others like it in his blog, gethuman.com.

What's more, Intervoice has seen both free cash flow and returns on capital decline rapidly in recent months, which suggests to me that the company is going to need all of the cash on its balance sheet to regain its footing.

So, call this stock story a classic fairy tale. Like "The Boy who Cried Wolf," it could end badly. Fools would do better to stick with Nuance, I think.

Look closer at buying patterns
Some of my worst mistakes in evaluating insider buying have come from ignoring the broader picture. That's why this comment in CAPS about Ruth's Chris Steak House left me concerned:

Ruth management has been actively buying shares on the open market recently, which is always a good sign. The COO just acquired an additional 20,000 shares.

Technically, this is exactly correct. Last week, company COO Geoffrey Stiles spent $364,000 to pad his direct stake, which equals more than 101,000 shares. Here's the problem: Stiles, who was a buyer at $18.20 a stub, was a seller in August, at $18.63 a share. Either he's a trader, he has little confidence in the business, or he is just putting some of his earlier gains back to work. (Stiles cashed out nearly $560,000 over the summer.)

The same is true for brokerage Jefferies, which saw more than $3.7 million worth of buying on Monday and Tuesday from CEO Richard Handler. But that's a pittance compared to the $17.7 million in selling orchestrated by Handler in May.

Neither of these situations strikes me as anywhere near as bullish as the minimalist action at business services provider CBIZ, which has several executives deducting cash from their paychecks to participate in the firm's stock purchase plan. Five different officers acquired new shares Monday as a result of the program.

The moral? Take a longer view of the risk being assumed by insiders before you assume a purchase is bullish. It may be little more than an empty gesture.

And that's all for this week. See you back here next Wednesday, when we dig through more insider deals in search of the next home run stock.

Get the inside scoop on stocks of all sizes with related Foolishness:

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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. Get the skinny on all of the stocks in his portfolio by checking Tim's Foolprofile. The Motley Fool'sdisclosure policyis a strong buy.


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