Famed money manager Peter Lynch gave us the inside scoop on how to look at insider transactions. Executives can sell their stock for any reason, he said, but they only buy for one: They think the price is going to go up!

Below we highlight a handful of insiders who are making big purchases of their own company's stock in the last week. These aren't executives getting big chunks of shares from option grants. Rather, they're insiders putting their own money on the line buying shares at market prices. We'll then pair that information with insights from the members of Motley Fool CAPS to see if they think the stock has the same prospects the insiders do.

Stock

Insider, Position

Market Value of Transactions

CAPS Rating (out of 5)

Scientific Games (Nasdaq: SGMS)

Ronald Perelman, director

$37.6 million

**

Valence Technology (Nasdaq: VLNC)

Carl Berg, director

$4.5 million

**

Pacific Capital Bancorp (Nasdaq: PCBC)

William Loomis, director

$1.0 million

**

Source: wsj.com; Motley Fool CAPs.

Although following the lead of insiders can be profitable, we still recommend you do further due diligence to determine whether these stocks make a good addition to your own portfolio. This isn't a list of stocks to buy, but just the inside track on companies you might want to check out further.

A big gamble
Gambling can be a fun diversion at times, but Scientific Games is probably the biggest name in the industry you never heard of.

Of the 44 states that sell instant lottery tickets, Scientific provides 43 of them with the tickets. They also operate the online lottery systems in 13 of the 43 states that have them and operate both wide area gaming and pari-mutuel wagering systems. Scientific is a leading player internationally as well. The possibility that Congress might resurrect online gambling in the lame-duck session had some analysts seeing Scientific Games hitting the jackpot if it came to pass, since it could become the industry regulatory authority.

The big-name casino operators would like to see the bill passed, as the recession has hit their revenue hard, but Scientific, International Game Technology (NYSE: IGT), WMS Industries (NYSE: WMS), and Bally Technologies, which already provide the gambling industry with the tools for such operations, would probably be the big winners.

Unfortunately, it looks as if the bill is dead for the time being, but Scientific isn't waiting, instead expanding boldly in China, perhaps the biggest potential market for its services. It's also bringing back its former CEO to head up the company. Perelman bought a huge chunk of this small cap.

CAPS member btthus was following the insiders when rating Scientific Games to outperform, and 88% of those rating it also believe it has better-than-even odds of beating the market. But only you can decide whether it's worth wagering on in your own portfolio, so add it to your watchlist and have all the Foolish news and analysis gathered together for you in one place.

All charged up
Battery demand is soaring as electric vehicles of all sizes start to catch on. While Advanced Battery Technologies (Nasdaq: ABAT) was able to post yet another profitable quarter on soaring demand for electric scooters, Valence Technology is counting on the commercial market to power its growth. Sales of battery-powered delivery trucks made by Smith Electric (Valence's second largest customer behind Segway) have been getting a big vote of confidence from some heavy hitters, including PepsiCo (NYSE: PEP) division Frito-Lay and Staples. Valence's second-quarter revenue was at an all-time high.

Valence also secured a supply deal with the U.K.'s Wrightbus that could generate $19 million to $24 million in battery sales over the six-year term of the agreement. That deal alone was enough for jcstyle10 to plug into the battery maker's growth prospects, expecting Valence to outperform.

Let us know on the Valence Technology CAPS page whether you think it will continue to motor on.

Don't bank on it
Pacific Capital Bancorp got only a short-lived bounce from its 1-for-100 reverse-stock split announcement at the beginning of the month. As Foolish investors understand, stock splits -- regular or reverse -- are a non-event, since they merely rearrange the number of slices in a pie. The company's value remains unchanged.

A reverse split, however, is often done by financially troubled companies, and in Pacific Capital's case the bank is fighting to maintain its stock listing on the Nasdaq exchange. With shares literally trading for pennies, director William Loomis may be suggesting the move will ultimately be successful.

Even an infusion earlier this year of $500 million from billionaire investor Gerald Ford (who made his fortune investing in distressed financial institutions) has had little impact on the bank's situation, though srhauck1 says he's not one to be throwing good money after bad:

Billionaire Gerald Ford just pumped 500 mill into the bank. I doubt he would do that for a sinking ship. With a rights offering on monday that would give stockholders a up to 15 to one split its [looking] like a 10 bagger to me. Just my 2 cents. I'm in.

On the inside track
Following the insiders can be a path to profits, but it pays to start your own research on these stocks on Motley Fool CAPS. Read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made, all from a stock's CAPS page. Sign up today for the completely free service, and tell us whether it's worth trading on this inside information.

Staples is a Motley Fool Stock Advisor selection. PepsiCo is a Motley Fool Income Investor choice. Motley Fool Options has recommended a diagonal call position on PepsiCo. The Fool owns shares of Bally Technologies and International Game Technology. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 

Fool contributor Rich Duprey does not have a financial position in any of the stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.