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:

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

No subtlety in buying Nuance
Some stocks are as troublesome as they are promising. Witness Nuance Communications, a voice recognition software maker and Motley Fool Hidden Gems selection. When the firm reported third-quarter earnings early this month, the results were as clear as octopus ink. Perhaps that's why, in updating Hidden Gems subscribers, fellow Fool Jim Gillies termed the report a "hairball."

Indeed. In its earnings reports, Nuance monkeys with all sorts of metrics that don't follow generally accepted accounting principles, largely because of acquisitions. For example, in the second paragraph of the Q3 announcement, management wrote that $7.9 million in revenue went unreported. That was "lost to purchase accounting in conjunction with company's acquisition of Dictaphone Corporation."

Confused? Me too. More important is that Jim's math shows Nuance trading for roughly 40 times its estimated full-year earnings. That's hardly cheap, but it isn't altogether unreasonable, either, once you evaluate the size of the problem Nuance is trying to solve.

How big, you ask? No real numbers exist that I'm aware of, but an increasingly popular site called Gethuman.com -- which founder Paul English estimates receives 20,000 visitors a day -- reveals how to circumvent automated systems at 415 companies, according to press reports. That's a massive opportunity for Nuance, which hopes to create voice-activated services that are comfortable for humans to use.

Not that Nuance is alone in tackling this problem. Microsoft (NASDAQ:MSFT) and Intervoice (NASDAQ:INTV) have both staked a claim, as have many private firms, including Tellme and Voxify.

But it's Nuance that has grabbed the attention of Warburg Pincus. Its equity stake dates to the days when the firm was known as ScanSoft. And that's what interests me most: Warburg could have cashed out at any time over the past two years, walking away with a fortune. Instead, it has steadily padded its position, including 1.5 million new shares this week. That's an impressive show of faith which, when coupled with Bill Mann's original recommendation, leaves the Foolish investor in me intrigued.

Playing frogger at LeapFrog
At first blush, the cheapskate in me loves LeapFrog. It's trading for barely above book value, and my kids very much enjoy the toy maker's gizmos. Sadly, it's not that simple, as fellow Fool Rick Munarriz points out here.

Nevertheless, turnarounds become possible with committed managers around. That's what appears to be happening here. New CEO Jeffrey Katz spent $100,000 to open a position this week, and three other executives have joined him. It's too early to tell if their faith will be rewarded, but I'm inclined to offer them the benefit of the doubt and add this stock to my watch list.

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 contributor Tim Beyers 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, though he consulted for Voxify in the past. Get the skinny on all of the stocks in his portfolio by checking Tim's Fool profile. Nuance is a Motley Fool Hidden Gems pick and Microsoft is an Inside Value selection. The Fool's disclosure policy is always a sure bet.