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 today.
The week's buying
|
Company |
Closing Price, March 7 |
Total Value Purchased |
52-Week Change |
|---|---|---|---|
|
Cabela's |
$14.06 |
$5,834,748 |
(42.8%) |
|
Builders FirstSource |
$6.56 |
$2,886,784 |
(62.5%) |
|
MF Global |
$18.50 |
$3,097,043 |
(27.8%) |
|
NII Holdings |
$36.97 |
$1,485,693 |
(48.3%) |
|
Psychiatric Solutions |
$31.97 |
$954,812 |
(16.7%) |
A stock to build on?
Bargains are created when markets collapse. But bargain stocks are rarely obvious. More often, they're frightening.
Witness Builders FirstSource. The housing bust has pummeled this Inside Value recommendation, which, as its name implies, supplies lumber and structural products to builders such as Centex
Most of those rating the stock in our 85,000-strong Motley Fool CAPS community don't see a turnaround in process:
|
Metric |
|
|---|---|
|
CAPS stars (out of 5) |
** |
|
Total ratings |
248 |
|
Bullish ratings |
209 |
|
Percent Bulls |
84.3% |
|
Bearish ratings |
39 |
|
Percent Bears |
15.7% |
|
Bullish pitches |
36 |
|
Bearish pitches |
7 |
They may be right. Housing starts are way down and, as Foolish colleague Richard Gibbons points out here, there's a chance that two in five homeowners will soon be upside-down on their mortgages.
Can you imagine investing in a lumber supplier when a growing portion of the population is already walking out on perfectly good homes they can't afford? Me neither.
But the housing bust will end someday. Executives at Builders FirstSource recognize this and, as a result, have put in place a cost-cutting plan that preserves cash flow for debt reduction, small acquisitions, and share repurchases.
It's working so far. Over the past year -- one of the worst in recent memory in terms of sales and earnings -- Builders FirstSource has:
- Produced more than $61 million in free cash flow.
- Cut its debt load by 12.5%.
Yes, I know, those aren't otherworldly numbers. But I'm impressed that, in an awful year, management still found a way to create value.
Can they continue to? A handful of insiders believe so, yes. Three directors who represent the interests of Warburg Pincus -- one of the largest institutional holders of Builders FirstSource stock -- have spent more than $2.9 million over the past week to increase their firm's stake. Not a small gamble.
But perhaps one worth making. Builders FirstSource joins my CAPS watch list today.
Go Global
Derivatives specialist MF Global has had a lousy two weeks. To review, a rogue trader incurred $141 million in losses when internal safeguards failed.
A week ago, insiders piled into the stock, committing more than $3 million in fresh capital. But if the Feb. 29 buying was a mad rush -- a day-after-Thanksgiving-style 24-hour clearance sale -- it didn't end when the weekend began.
On the following Monday, after shares of MF Global had regained some 12% in value, board member Eileen Fusco spent more than $48,000 to add to her position in the stock.
Her faith, and that of her colleagues, could be rewarded at the end of the month when MF Global reports earnings. Why? Executives issued a press statement earlier last Friday in which they said fourth-quarter revenue would "remain at higher levels than in any comparable period during the current fiscal year."
Translation: Yeah, one of our guys blew it, but we're still growing.
There's your update. See you back here next time when we dig through more insider filings in search of the next home run stock.
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