You're Not the Only One Buying Here

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 will rise!

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. Instead, they're insiders putting their own money on the line, and buying shares at market prices. We'll then pair that information with insights from the members of Motley Fool CAPS, to see whether they think the stock has the same prospects the insiders do.

Source: wsj.com; Motley Fool CAPS.

Although following insiders' lead can be profitable, we still recommend that 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 -- just the inside track on companies you might want to check out further.

An investment in the future
If nothing else, he's persistent. Founder and CEO Alfred Mann purchased yet another large tranche in MannKind's (Nasdaq: MNKD) stock, to the tune of about $6 million. That's atop the $5.8 million purchase made the week before, and others over the past few years. But it's not too hard to guess why Mann is buying.

Instead, let's see why Mark Rachesky is adding to his already substantial stake in Lions Gate Entertainment, now in excess of 21% of the company. This onetime Carl Icahn employee and protege  also serves as director for Leap Wireless (Nasdaq: LEAP) and Loral Space & Communications.

It's well known that Carl Icahn tried to cage the movie studio with a $7.50-per-share offer, but Lions Gate management wasn't willing to end up on the cutting-room floor. They orchestrated a debt-for-stock offering with Rachesky, who purchased $100 million worth of Lions Gate debt and immediately converted it into stock. The move diluted Icahn's stake and boosted Rachesky's; he' been acquiring more shares over the years, even as Icahn was doing the same thing.

With the new, larger voting bloc supporting management, Lions Gate was able to block Icahn's bid to take over the studio, and the corporate activist subsequently let his tender offer expire. Yet since the rancor between Icahn and Lions Gate is still roaring, Rachesky continues to build up his own stake in the studio.

While 86% of the CAPS members who've rated the studio believe it will outperform the market, the lower stock price as a result of Icahn's exit from the stage -- for now -- suggests they feel that now's a good time to hit the red carpet. Make a surprise cameo on the Lions Gate Entertainment CAPS page and let us know what you think of this movie studio's prospects.

Enterprising growth
Like a shark that will die if it doesn't keep moving, Icahn swims after other fish. Right now, he's building his position in Lawson Software, a company he previously deemed undervalued. Although the stock has increased by more than 20% since then, Icahn apparently believes that the software maker hasn't achieved full value yet. Lawson is one of the largest enterprise-resource-planning specialists, in a field dominated by Oracle (Nasdaq: ORCL) and SAP (NYSE: SAP).

Like Lions Gate, a similarly high percentage of CAPS members agree with Icahn that Lawson is undervalued, and dub the company a likely market-beater. Follow along by adding the software maker to your watchlist, and get all our Foolish news and analysis on Lawson aggregated for you.

Put up or shut up
It's not the largest purchase an insider can make, but director Michael Pietrangelo's market purchase of Universal Insurance stock seems to indicate that he believes there's more upside potential here. Universal's shares have risen 16% since the start of the new year.

Still,CAPS member DIWR17 worries about other insiders who are selling. The CEO unloaded $1 million worth of shares last month: "If they keep diluting the float how can we ever see any real appreciation. I get the impression they keep paying themselves throught the dividends."

While Pietrangelo's purchase was recorded the other day, the transaction actually occurred at the end of last month, but that's no matter. Universal's stock has been on a tear for months now, and while the CEO did sell some stock, he still owns more than 13.6 million shares -- a sizeable slug for anyone.

Add the insurer to the Fool's free portfolio tracker, then head over to the Universal Insurance CAPS page to let us know what you think about all these trades.

On the inside track
Following the insiders can be a path to profits. Still, 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 you'd be ready to trade on this inside information.