Who's Buying Now?

It's time again this week to check the most interesting recent 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 7/2/08

Total Value Purchased

52-Week Change

BE Aerospace (Nasdaq: BEAV  )

$21.55

$109,446

(48.9%)

CapitalSource (NYSE: CSE  )

$10.90

$3,949,000

(49.3%)

Dell (Nasdaq: DELL  )

$22.70

$99,711,594

(21.5%)

Dick's Sporting Goods (NYSE: DKS  )

$16.54

$1,073,575

(43.3%)

Liberty Media (Nasdaq: LCAPA  )

$14.20

$9,635,893

(40.2%)

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

Dumbfounded by Dell
It's easy to make fun of Michael Dell and his Dell 2.0 "cut costs at all costs" strategy. But there's no ridiculing a $100 million bet on your own stock. That's how much Mike has put into Dell over the past seven days.

He made his purchases in huge chunks. First was a $49.9 million bet last Friday in which he acquired 2.23 million shares at $22.39 each. Then, on Monday, he added 100,000 more at $21.94 a share. Finally, on Tuesday, he put up $47.6 million more for another 2.2 million shares.

Not many in our 110,000-strong Motley Fool CAPS community would make a similar bet:

Metric

Dell

CAPS stars (5 max)

**

Total ratings

4,976

Bullish ratings

3,490

Percent Bulls

70.1%

Bearish ratings

1,487

Percent Bears

29.9%

Bullish pitches

682

Bearish pitches

344

Data current as of July 2.

They're not alone. I wouldn't touch Dell; I see zero competitive advantage in its business. It lacks both the sex appeal and brand strength of Apple (Nasdaq: AAPL  ) and the inventiveness and distribution network of Hewlett-Packard (NYSE: HPQ  ) .

But not all Fools agree. Reasoning that its free cash flow -- $3.4 billion over the trailing 12 months -- is worth far more than the market values the business, our team at Inside Value sees significant upside to Dell at $22. Dell's $100 million bet lends credibility to that thesis.

Other bulls, such as CAPS All-Star blade5adj, see value in Dell's product design. Quoting from a pitch he posted last month:

They've also made an extremely large commitment to increasing efficiency and decreasing power consumption, which as it was featured in a recent Economist article, will become exceptionally important for consumers, especially those using servers. When you think about it, if you can purchase a product that will cut your energy consumption in half, you're drastically reducing your overhead. In such a capital-intensive industry as servers, this is a huge chunk that you'd be adding back to your [profit-and-loss] statement.

Is it a great time to be a value investor in Dell? I wouldn't go there, but there's no arguing that some very smart people -- including some Fools I deeply respect -- think I'm nuts.

Excess capital for CapitalSource
I'm a lot more certain of the thesis for CapitalSource. Why? Two reasons. First, I like that there's more than one insider buying shares. Michael Szwajkowski, president of the structured financing business, joined CEO John Delaney in buying last week.

Second, I like the opportunity. That's right; I don't want to focus just on the dividend. Foolish colleague James Early -- co-advisor to our Income Investor service -- sees CapitalSource trimming its 22% yield some as it invests in banking operations that should increase its interest rate spreads and, James says, unlock value.

CAPS investor EarningsPower agrees and suggests that management's experience with distressed credit markets offers investors a competitive advantage. Quoting from his February pitch: "CSE's experienced and shareholder friendly management team has a long and successful paper trail of generating above average wealth (ROIC) for [its] shareholders. Management has mentioned many times that their experience ('98) during previous periods of distress and capital markets upheaval has played a large role in forming CSE's current operating model and competitive strategy (a model founded on conservative lending and liquidity practices)."

I'm always in favor of companies that produce above-average returns on capital, especially when the managers of those companies are increasing their stake. CapitalSource joins my CAPS portfolio 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.

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

The Motley Fool owns shares of CapitalSource, which is an Income Investor pick. Dell is an Inside Value recommendation. Apple is a Stock Advisor selection.

Fool contributor Tim Beyers, who is ranked 19,594 out of more than 110,000 participants in CAPS, also writes for Rule Breakers. He didn't own shares in any of the companies mentioned in this article at the time of publication. See Tim's portfolio and his latest blog commentary. The Motley Fool has a disclosure policy.


Read/Post Comments (1) | Recommend This Article (8)

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  • Report this Comment On July 03, 2008, at 8:59 PM, weiwentg wrote:

    I would disagree on Capitalsource. right now, the company uses the capital markets to fund operations by issuing shares. by issuing shares at a discount to book value, and at such a high interest rate, they're actually diluting stockholders pretty severely. they recently announced that the interest rate on their unsecured credit line had gone up quite a bit, so debt isn't a great option, either. and they need to securitize current loans and acquire cash from the capital or debt markets so they can lend out more money.

    frankly, they should have stopped being a REIT last year, but that's a moot point with their impaired access to the capital and debt markets. I think the company can survive until the credit crisis passes, but it will be a weaker company.

    bottom line, there are better investment opportunities than companies which more or less solely depend on the capital markets to fund their operations.

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