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 12/19/06

Total Value of Stock Purchased

52-Week Change

AMERCO (Nasdaq: UHAL  )

$86.09

$9,500,000

21%

Assisted Living Concepts (NYSE: ALC  )

$9.30

$96,577

8%*

Chiquita Brands (NYSE: CQB  )

$15.73

$48,298

(20%)

Concord Camera (Nasdaq: LENS  )

$4.49

$45,802

(18%)

RPC (NYSE: RES  )

$17.26

$3,666,321

(1%)

Sources: Fool.com, Yahoo! Finance, Form 4 Oracle, SEC filings
*Assisted Living began trading on Nov. 9, 2006.

Peeling Chiquita
"Beware the dreaded value trap," say Foolish value investors. It's good advice. Cheap stocks are usually cheap because they face one or more problems. In the case of banana baron Chiquita Brands, it's more.

Problems include higher costs for importing bananas to Europe and huge interest payments on debt incurred during an $855 million acquisition of Fresh Express salads from Performance Foods (Nasdaq: PFGC  ) . To preserve needed capital, Chiquita suspended its dividend in September.

That would have punished the stock severely if it weren't for an E. coli outbreak occurring at the same time. Within two weeks of the first deaths related to tainted bags of spinach, Chiquita's shares had plunged by 24%, even though its products weren't involved in the scare.

For investors participating in our Motley Fool CAPS community intelligence database, that tasted like opportunity:

Metric

Chiquita

Total ratings

81

Bullish ratings

66

Bull ratio

81.5%

Bearish ratings

15

Bear ratio

18.5%

Bullish pitches

29

Bearish pitches

4

Source: Motley Fool CAPS

Foolish participant jethromoore explained the thesis for going long in his pitch to fellow players:

"Well, the E. coli scare was basically a hoax, and with the dividend being suspended to fix it, the company will only further [its] monopoly on the fresh salad industry."

"Monopoly" is probably too strong a word. Nevertheless, Fresh Express invented the packaged-salad industry 17 years ago and still supplies 40% of the packaged salads purchased in American grocery stores, according to USA Today

The valuation looks good, too. My back-of-the-napkin math says Chiquita is valued as if its five-year average free cash flow, discounted by 13%, would grow by just 7% annually for the next five years and 3% thereafter. Yet in the five years ended last December, Chiquita had grown FCF by an average of 10.3% annually.

That's intriguing, but is it a value trap? Management says no. CEO Fernando Aguirre, already a holder of more than 200,000 shares, spent roughly $48,000 on Friday to buy stock on behalf of his minor children. That more than doubled their exposure to Chiquita.

Still, there's reason to be worried. Bananas account for more than 50% of Chiquita's annual sales and a European stiff-arm is already taking its toll on revenue. I'm willing to take extra time to see how Aguirre and his team deal with Europe and the other problems they face before adding the stock to my CAPS portfolio.

More of the book on book value
Interesting speculations always capture my attention. Photography equipment maker Concord Camera is like that. Despite a legacy of losses and trouble with the Nasdaq, CEO Ira Lampert has, since early December, spent roughly $46,000 to boost his position in the stock.

What gives? Three things, from what I see. First, on Dec. 6, Concord announced it had met the market's minimum listing requirements after being out of compliance weeks earlier. Second, Capital IQ shows $700,000 worth of free cash flow over the trailing 12 months, after years of burning Benjamins like logs in winter. Third and finally, Concord trades for well below its tangible book value.

Low price-to-book stocks can be incredibly appealing. Problem is, stocks that trade for less than book value tend to be destroying, rather than creating, shareholder value. That's why Professor Aswath Damodaran, author of Investing Fables, counsels buying only into those low price-to-book stocks that produce better than average returns on equity. That's not Concord; its ROE, though improving recently, has run negative since 2003.

Lampert's buying may look tempting. It was for me. Just be careful: Concord could be exactly the sort of value trap that Chiquita seems to be at first glance.

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.

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Fool contributorTim Beyers, ranked 986 out of 17,966 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. Motley Fool'sdisclosure policyis a strong buy.


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