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


Closing Price 6/11/08

Total Value Purchased

52-Week Change

China Security & Surveillance (NYSE:CSR)




Jarden (NYSE:JAH)




Masco (NYSE:MAS)




MVC Capital (NYSE:MVC)




Wells Fargo (NYSE:WFC)




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

Don't mess with Texas, Wells Fargo

Recent history hasn't been kind to insiders. Bankers, especially. Here's why:

  • Insiders at Wachovia (NYSE:WB) were buying at around $38 a share in November. The stock is down roughly 50% since.
  • Citigroup's (NYSE:C) CEO for Latin America and Mexico, Manuel Medina-Mora, bought 185,000 shares for about $27 apiece in January. The stock trades for $20 a share today.

Not much of a record, is it?

I'll understand if banks are off your list of potential investments for the time being -- even those where insider buying is occurring, like Wachovia, Citigroup, and today's topper, Wells Fargo.

After all, the California-based banker gets mixed reviews from our 105,000-plus-strong Motley Fool CAPS community. Behold:


Wells Fargo

CAPS stars (out of 5)


Total ratings


Bullish ratings


Percent bulls


Bearish ratings


Percent bears


Bullish pitches


Bearish pitches


Data current as of June 11, 2008.

I can't blame them. Warren Buffett's Berkshire Hathaway, a longtime holder of the stock, has trimmed its position by nearly 21 million shares since December.

We can't know exactly why Buffett, partner Charlie Munger, and the rest of the Berkshire investment team have trimmed their stake in Wells Fargo. What we do know is that they're looking very smart today. Shares of the bank are down about 15% year to date.

Worse, its Texas Ratio -- a measure named for its ability to accurately predict bank failures of the sort that plagued Texas in the 1980s -- has been steadily climbing. More on that in a minute.

First, let's talk about the ratio itself. Created by RBC Capital Markets analyst Gerard Cassidy and a team of colleagues, the ratio is supposed to act as a sort of early warning system by comparing problem assets with capital. Banks with a low ratio are better than those with a high -- or rising -- ratio.

Calculating it isn't difficult. First, combine the bank's nonperforming loans with the value of those marked 90 days past due. Then divide by the sum of its tangible book value and provision for loan losses. The resulting percentage reveals the claim that bad loans are making upon the bank's capital. As it approaches and exceeds 100%, the bank can be viewed as being in trouble.

Now, here's how Wells Fargo rates:

Metrics (in millions)





90-day past due loans





Nonperforming loans





Tangible book value





Allowance for loan losses





Texas Ratio





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

I don't like that the bank's Texas Ratio is rising. What I do like is that it's climbing at a slower pace than it has been. To some, that may suggest the bank's executives are doing a better job of cultivating good assets as they prune the bad ones.

CAPS investor tmcmill81 best summed up the bull case in a post from earlier today, I think. Quoting:

Probably the best bank ... this will outperform with dividends for a little while, probably not by as much as some of the beaten down names though, such as [Citigroup], [Merrill Lynch], and [Lehman Brothers]. However, it will outperform without the risk associated with the other names.

Insiders appear to agree. CEO John Stumpf was buying in May and, last week, chairman Richard Kovacevich plunked down more than $1 million in personal wealth to add to his stake.

Impressive. Yet I'm not as prepared to pull the trigger as Kovacevich is; a rising Texas Ratio presents too much risk. I'd rather wait a quarter to see if management can, indeed, reverse the trend.

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.

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