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 4/29/09

Total Value Purchased

52-Week Change

Prospect Capital (Nasdaq: PSEC  )

$8.93

$658,871

(32.2%)

Fair Isaac (NYSE: FIC  )

$16.81

$160,053

(27.4%)

Manhattan Associates (Nasdaq: MANH  )

$16.65

$160,000

(36.4%)

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

Better prospects for Prospect Capital?
History sometimes speaks well for executives who buy and buy again as their stocks fall. Witness the bank barons. For all the trouble that Bank of America's (NYSE: BAC  ) leadership has caused, some members of that crew are now sitting on multibagger returns, thanks to February purchases of their own company's stock.

Insiders at Wells Fargo (NYSE: WFC  ) and Citigroup (NYSE: C  ) -- Citi-freaking-group! -- have seen similar gains on their companies' stock. Once you get past the outrage, it's rather astounding to think about the gains that these executives are enjoying.

And yet insiders who try to catch falling knives sometimes get cut. Very, very badly, in the case of Chesapeake Energy's (NYSE: CHK  ) Aubrey McClendon, who loaded up on shares of the company he co-founded, only to see a margin call wipe out virtually all of his holdings.

So if I'm nervous about the repetitive buying by the insiders at Prospect Capital, a debt-and-equity investment firm in which I also own shares, you now know why. The good news? Few members of our 130,000-strong Motley Fool CAPS community share my anxiety:

Metric

Prospect Capital

CAPS stars (out of 5)

*****

Total ratings

404

Percent bulls

97.8%

Percent bears

2.2%

Bullish pitches

67 of 69

Data current as of April 30, 2009.

"Smart management moves through the past year has put this company in a good position for growth," wrote CAPS investor OilFieldFool in March. "I believe that the company is... undervalued at this point."

And that call came at $8.13 a share, about $1 a share lower than where you'd be buying today, and close to what CEO John Barry paid last week. He acquired more than 80,000 shares for between $7.87 and $8.01 each.

That should be encouraging. Prospect Capital recently closed a public offering of 3.68 million shares at $7.75 each. Instead of buying at the offering, Barry paid a small market premium. Meanwhile, the proceeds from the offering -- $28.52 million before expenses -- will help to pay down debt and sustain an extremely generous double-digit dividend yield. (More than 18%, as of this writing.)

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:

Chesapeake Energy is a Motley Fool Inside Value pick. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Tim Beyers is slowly improving his CAPS score. Thankfully, he's doing better as an analyst for Motley Fool Rule Breakers. Tim owned shares of Prospect Capital at the time of publication. Check out his portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. The Motley Fool is also on Twitter as @TheMotleyFool. Its disclosure policy knew a rich executive once. She never bought anything.


Read/Post Comments (1) | Recommend This Article (4)

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 April 30, 2009, at 5:47 PM, Seano67 wrote:

    I'm all about PSEC and its prospects going forward. You hear nothing but good buzz about that company, and I am talking about from a whole wide variety of places, sources and rating services, and whether bullish or bearish on the market and economy overall, they're nearly all looking favorably upon the future prospects for Prospect Capital. ;)

    So go PSEC!

Add your comment.

DocumentId: 888581, ~/Articles/ArticleHandler.aspx, 8/1/2014 8:09:54 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement