Increased Insider Stock Purchases of Cabela's Raise Intriguing Possibilities

| About: Cabela's Incorporated (CAB)

Cabela's (NYSE:CAB) is an interesting company. Founded in 1961 and based in Sidney, Nebraska, Cabela's is the world's largest direct marketer of hunting, fishing, camping and related outdoor merchandise, including casual apparel and footwear and vehicle accessories. Known as the "World's Foremost Outfitter," Cabela's also operates 31 retail stores and owns World's Foremost Bank, a Nebraska state-chartered bank that issues and manages its Cabela Club Visa card program and also offers certificates of deposit. The bank has 1.3 million credit card accounts with receivables of $2.5 billion at an annual interest rate of 19.7%.

As one might expect from a company based in Nebraska, the bank's underwriting standards are conservative: The average FICO credit score of Cabela's credit card holders is 790, well above the median score of around 720, and the number of card holders delinquent by more than 30 days was only 1.13% at year end 2010, down from 1.79% at year end 2009.

Cabela's stock price has been on a tear since hitting a 52-week low of $12.83 back in July 2010. But after peaking at $32.37 in late February, CAB backed off to $24.77 at last Friday's close, which puts the stock not very far above a nice support area in the $22.50-23 range.

Even though CAB's stock price has virtually doubled since last July, it still trades for only 13 times 2011 earnings estimates of $1.92 per share, which seems quite reasonable considering the company has recently been beating estimates rather handily. In fact, CAB has beat analyst estimates in the past four quarters.

But here's what really intrigues me about Cabela's: One of its directors, Reuben Mark, has recently been buying large chunks of CAB in the open market. In fact, between February 25 and March 11, Mr. Mark bought 10,000 shares per day on virtually every trading day for a grand total of 110,000 shares at prices between $26.24 and $27.35. In addition, back in November-December 2010, Mr. Mark bought 50,613 shares between $22.78-23.08. He now holds a total of 1,119,413 CAB shares.

Reuben Mark, if you don't recognize the name, is one of the most respected former CEOs in recent history. He served as Chief Executive Officer of Colgate-Palmolive Co. (NYSE:CL) from 1986 until 2007, and was Chairman of the Board from 1986 until 2008. During his tenure as Colgate's CEO, its stock price outperformed that of General Electric (NYSE:GE) during that company's Jack Welch years. Mr. Mark was also a Director of Citigroup (NYSE:C) from 1986-2003; of Time-Warner (NYSE:TWX) from 1993-2009; and of Pearson PLC (NYSE:PSO) from 1988-2006.

As I mentioned, Cabela's is a Nebraska-based company. Another of its directors and major shareholders, John Gottschalk, is also Nebraska-based. Mr. Gottschalk is Chairman of Omaha World-Herald Co., publisher of the Omaha World-Herald newspaper, and was its CEO from 1989-2007. Omaha, by the way, is also the base of Berkshire Hathaway (NYSE:BRK.A) and the hometown of Warren Buffett, Berkshire's CEO and a former newspaper man himself.

Meanwhile, consider that Richard N. Cabela, chairman of Cabela's and the company's founder, is 74 years old. Vice Chairman James W. Cabela is 71, and Reuben Mark, who has been buying so much stock on the open market over the past few months, is 72. Which leads me to wonder: Is it possible that at some point in the not-too-distant future this Nebraska-based company -- a leader in its market, which sells products to middle-America customers and also owns a conservatively-run bank with a $2.5 billion, high-yielding credit card portfolio -- could wind up being acquired?

Just wondering, that's all.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.