Who's Buying Now?

It's time again to check the past 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 11/21/06

Total value of stock purchased

52-week change

Blockbuster (NYSE: BBI  )

$4.51

$1,025,199

25%

Carmike Cinemas (Nasdaq: CKEC  )

$20.38

$936,775

(19%)

Goodman Global (NYSE: GGL  )

$16.97

$41,439

(17%)*

Morgans Hotel Group (Nasdaq: MHGC  )

$14.95

$654,330

(25%)*

Pep Boys (NYSE: PBY  )

$13.40

$16,924,958

(8%)

Sources: Fool.com, Yahoo! Finance, Form 4 Oracle, SEC filings
*Morgans Hotel Group began trading on Feb. 14, 2006, and Goodman Global on April 7, 2006

New mechanic fixing Pep Boys?
Just how bad has business been at auto-fixit store Pep Boys? Bad enough. Even the most recent quarter, which has to be counted as a success by most measures, featured a net loss of more than $7 million.

Worse, Pep Boys is still well behind competitors when it comes to operating margins. On that line, Manny, Moe, and Jack manage to earn only $0.054 for every dollar spent at their stores. AutoZone (NYSE: AZO  ) , O'Reilly Automotive, and Advanced Auto Parts all earn $0.09 or more.

Still, many of those participating in the Motley Fools CAPS community intelligence stock database appear to believe that Pep Boys has sunk into value territory:

Metric

Pep Boys

Total ratings

33

Bullish ratings

22

Bull ratio

66.7%

Bearish ratings

11

Bear ratio

33.3%

Bullish pitches

4

Bearish pitches

4

Source: Motley Fool CAPS

So, too, do a number of significant investors, including activist hedge fund manager Pirate Capital and interim CEO William Leonard, who has been a board member since 2002. Last Thursday, he spent more than a half-million to boost his stake in the company by 62%.

Why? CAPS player investoramateur offered a potential explanation a month ago, which I think is still relevant:

"Underlying real estate value is greater than the market cap. This stock is deeply undervalued."

Indeed, the "at-cost" value of land and buildings owned by Pep Boys was more than $1.1 billion as of January. And yet Pep Boys' stock trades for just $735 million as of today's close. My guess is that valuation will look very cheap if Leonard finds a way to extract gains from existing stores while selling off property that the firm can't use. And if he doesn't, I fully expect Pirate Capital to force him out in favor of someone who can.

Scary movie
Sometimes, insider buying is just a distraction. I wonder whether that's what we've got with both Carmike and Blockbuster. Fellow Fool Rick Munarriz has already made a strong case against Blockbuster, so I won't repeat it.

Let's focus instead on Carmike, which runs small-market theaters. In August, the firm fell well short of Street estimates in recording a $0.53 per share loss. Not much good has happened since. Net losses continued in the September quarter and free cash flow for the first nine months of the year has run negative by more than $12 million.

Still, CEO Michael Patrick is buying. He spent more than $900,000 on shares between Thursday and Friday of last week. That ought to be a bullish sign, right? Here's why it isn't: chief operating officer Fred Van Noy and film vice president Anthony Rhead together liquidated nearly 100% of their holdings at the same time, if you exclude the unvested restricted stock they still hold. Yeesh.

I don't like scary movies, either on the screen or in the stock market. From what I can tell, Carmike is as scary as they come.

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 Beyers, ranked 1,341 out of 13,868 inMotley Fool CAPS, usually 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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