Stocks the Rich Executives Are Buying

Put five Fools in a room, ask them how they invest, and you'll likely get five different answers. Some like growth, others value, or small caps, or dividends, or, well, you get the picture.

Yet while our styles differ, we all want excellent, engaged managers running the companies we own. We like it even more when these managers are also owners -- investors like you and me who, in trying times like these, are willing to buy as others sell. That's why I write this column weekly.

The week's buying
So which rich executives are buying now? Have a look, courtesy of our friends at Form 4 Oracle:

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

Better prospects for Prospect Capital?
History sometimes speaks well for executives who buy and buy again as their stocks fall. Witness the bank barons. For all the trouble that Bank of America's (NYSE:BAC) leadership has caused, some members of that crew are now sitting on multibagger returns, thanks to February purchases of their own company's stock.

Insiders at Wells Fargo (NYSE:WFC) and Citigroup (NYSE:C) -- Citi-freaking-group! -- have seen similar gains on their companies' stock. Once you get past the outrage, it's rather astounding to think about the gains that these executives are enjoying.

And yet insiders who try to catch falling knives sometimes get cut. Very, very badly, in the case of Chesapeake Energy's (NYSE:CHK) Aubrey McClendon, who loaded up on shares of the company he co-founded, only to see a margin call wipe out virtually all of his holdings.

So if I'm nervous about the repetitive buying by the insiders at Prospect Capital, a debt-and-equity investment firm in which I also own shares, you now know why. The good news? Few members of our 130,000-strong Motley Fool CAPS community share my anxiety:

Data current as of April 30, 2009.

"Smart management moves through the past year has put this company in a good position for growth," wrote CAPS investor OilFieldFool in March. "I believe that the company is... undervalued at this point."

And that call came at $8.13 a share, about $1 a share lower than where you'd be buying today, and close to what CEO John Barry paid last week. He acquired more than 80,000 shares for between $7.87 and $8.01 each.

That should be encouraging. Prospect Capital recently closed a public offering of 3.68 million shares at $7.75 each. Instead of buying at the offering, Barry paid a small market premium. Meanwhile, the proceeds from the offering -- $28.52 million before expenses -- will help to pay down debt and sustain an extremely generous double-digit dividend yield. (More than 18%, as of this writing.)

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.

Get the inside scoop on stocks of all sizes with related Foolishness:

• Find out which executives were buying last time.
• And here's a look at who has been selling.
• Here's what the swine flu panic means for investors.