Stocks the Rich Executives Are Buying

Put five Fools in a room, ask them how they invest, and you'll likely get five different answers. Some like growth, others value, or small caps, or dividends, or, well, you get the picture.

Yet, while our styles differ, we all want excellent, engaged managers running the companies we own. We like it even more when these managers are also owners -- investors like you and me who, in trying times like these, are willing to buy as others sell. That's why I write this column weekly.

The week's buying
So which rich executives are buying now? Have a look, courtesy of our friends at Form 4 Oracle:

Company

Closing Price Jan. 13, 2009

Total Value Purchased

52-Week Change

Ann Taylor (NYSE: ANN  )

$5.16

$560,697

(73.6%)

AutoNation (NYSE: AN  )

$8.97

$996,720

(31.1%)

MVC Capital (NYSE: MVC  )

$11.03

$5,772

(24.3%)

Winthrop Realty Trust (NYSE: FUR  )

$11.92

$239,599

(50.4%)

Wynn Resorts (Nasdaq: WYNN  )

$39.23

$195,049

(61.1%)

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

Bill's big bet
Fools will remember seeing AutoNation in this column before, thanks to big buys by Sears Holdings (Nasdaq: SHLD  ) chairman Eddie Lampert.

So far, his record is mixed. Lampert was in at $17.48 a share in November of 2007, only to see the stock drop another 48%. The good news? Lampert hasn't just watched the knife fall. He was back in at just over $6 a share in November and has collected some healthy gains since.

So has Microsoft co-founder Bill Gates. Like Lampert, he has been piling into AutoNation since November through his firm, Cascade Investment LLC, and the foundation he runs with wife Melinda. The difference is that Gates is still buying; 100,000 shares at $9.97 apiece a week ago.

Those who rate the company in our 125,000-strong Motley Fool CAPS community aren't as confident as Gates or Lampert:

Metric

AutoNation

CAPS stars (5 max)

**

Total ratings

198

Bullish ratings

137

Percent Bulls

69.2%

Bearish ratings

61

Percent Bears

30.8%

Bullish pitches

20

Bearish pitches

7

Note: Data current as of Jan. 14, 2009.

CAPS All-Star TrustMatzen doesn't trust AutoNation's balance sheet. Quoting from a pitch from December:

I am calling an underperform position on this stock and [CarMax] today. ... I expect a horrible report. Both of these stocks are in debt, diminishing margins, less revenue, and more depreciation. Look at the numbers. No loans available, and the people that are defaulting on loans most likely are the ones with loans on used cars. The automaker deal just fell through, but I believe it will work out in the end. While dealers continue to offer great deals for new cars, used cars 1-6 years old will not be able to be sold for a profit.

There seems to be some truth to that. Multiple press reports speak of a weak used-car market that's cutting into the earnings of rental giants like Hertz (NYSE: HTZ  ) and others.

And while a history of management efficiency spoke well of Lampert's buy in 2007, the numbers aren't as good as they used to be:

Metrics

Trailing 12 Months

2007

2006

2005

Return on capital

5.4%

5.9%

6.5%

6.5%

Return on equity

(44.5%)

8.0%

7.9%

8.8%

Gross margin

16.4%

16.1%

16.0%

15.9%

Source: Capital IQ, a division of Standard & Poor's.

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.

For related Foolishness:

Beginning Jan. 12, 2009, Fool co-founder David Gardner, Jeff Fischer, and their Motley Fool Pro team will accept new subscribers to their real-money portfolio service. Motley Fool Pro is investing $1 million of the Fool’s own money in long and short positions in a range of securities, including common stocks, put and call options, and exchange-traded funds (ETFs). They also incorporate proprietary CAPS "community intelligence" data into their research. To learn more about Motley Fool Pro, and to receive a private invitation to join, simply enter your email address in the box below.

MVC Capital is a Motley Fool Hidden Gems recommendation. Microsoft, CarMax, and Sears Holdings are Inside Value picks.

Fool contributor Tim Beyers is slowly improving his CAPS score. Thankfully, he's doing better as an analyst for Rule Breakers. Tim owned several Hawaiian shirts but no shares in any of the companies mentioned in this article at the time of publication. Check out his portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. The Motley Fool owns shares of MVC and is also on Twitter as @TheMotleyFool. Its disclosure policy knew a rich executive once. She never bought anything.


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