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When insiders buy shares of their own company I take notice. Sure, there are times when a newly-elected director is forced to buy shares but I still view increases in insider purchases as a reason to do further research.

Based on data provided by Finviz, the following 10 purchases were the largest for the past 10 days (ending August 30, 2012). The first table shows the company stock bought, who bought it, their relationship with the company and when they purchased the stock. The second table shows how many shares they acquired, the value and their total holdings.

Note: I have not looked into the reasons behind the purchases. I am simply using the purchase as a flag to look further into the company's financial profile.

Table 1:

TickerCompanyOwnerRelationshipDate
(NASDAQ:BNCN)BNC BancorpAquiline BNC Holdings LLCDirectorAug-24
(NASDAQ:FDML)Federal-Mogul Corp.ICAHN CARL CNon-executive Board ChairmanAug-30
(NYSE:AXS)Axis Capital Holdings LimitedNICHOLS JOHN DRAKECEO, AXIS ReAug-30
(NASDAQ:GMCR)Green Mountain Coffee Roasters Inc.DEL VECCHIO JULES ADirectorAug-30
(NYSE:XRM)Xerium Technologies Inc.Wilson James ForbesDirectorAug-29
(NASDAQ:PRSC)Providence Service Corp.Coliseum Capital Management, LDirectorAug-27
Providence Service Corp.Coliseum Capital Management, LDirectorAug-23
(NASDAQ:MCGC)MCG Capital CorporationNEU RICHARD WChief Executive OfficerAug-28
(NASDAQ:CYBX)Cyberonics Inc.Olin Bryan DVP, QualityAug-30
(NYSE:CHH)Choice Hotels International Inc.ALEXANDER STILES BARBARADirectorAug-27
(NASDAQ:PLCM)Polycom, Inc.MERCER D SCOTTDirectorAug-23

Table 2:

TickerOwner#SharesValue ($)#Shares Total
BNCNAquiline BNC Holdings LLC12,79011,807,34412,790
FDMLICAHN CARL C239,1492,250,39276,697,804
AXSNICHOLS JOHN DRAKE30,0001,008,14180,000
GMCRDEL VECCHIO JULES A20,000481,267260,719
XRMWilson James Forbes100,300426,2752,047,282
PRSCColiseum Capital Management, L35,413401,9381,954,530
PRSCColiseum Capital Management, L29,530338,7091,916,317
MCGCNEU RICHARD W72,577329,478242,259
CYBXOlin Bryan D18,750276,00082,636
CHHALEXANDER STILES BARBARA8,000256,00010,924
PLCMMERCER D SCOTT25,000237,75025,000

If these people are interested, so am I. So let's take a deeper look into the companies being acquired. (Note: this is not a solicitation to buy these stocks. Always do your own due diligence and speak with a financial advisor before investing.)

Table 3 below shows the sectors, size and buy value as a percent of market cap for the shares being acquired. As it relates to market cap, it appears like the BNCN purchase was the most substantial. This, however, was somewhat of an unusual transaction because Aquiline purchased the shares directly from the US Treasury as part of a TARP auction at a price well above the listed NASDAQ price.

Table 3:

TickerIndustryMarket Cap ($M)Buy Value ($M)
BNCNRegional - Mid-Atlantic Banks116.4311.8110.14%
FDMLAuto Parts925.72.250.24%
AXSProperty & Casualty Insurance4339.841.010.02%
GMCRProcessed & Packaged Goods3780.930.480.01%
XRMPaper & Paper Products67.560.430.63%
PRSCSpecialized Health Services149.360.740.50%
MCGCAsset Management343.680.330.10%
CYBXMedical Appliances & Equipment1377.070.280.02%
CHHLodging18260.260.01%
PLCMProcessing Systems & Products1842.670.240.01%

Table 4 looks at valuations. Based on forward earnings projections, all except for CYBX and CHH have sub-15 P/E ratios. On a price-to-book basis, FDML, AXS and MCGC look interesting, as they are all trading below book value. Moreover, FDML is trading close to cash.

Table 4:

TickerP/EForward P/EP/SP/BP/Cash
BNCN15.210.131.091.335.04
FDML 5.20.140.991.29
AXS7.429.041.130.735.78
GMCR11.29.721.041.7127.2
XRM110.754.920.12 2.01
PRSC12.6811.080.151.372.98
MCGC 10.114.540.882.18
CYBX39.0127.286.37.514.25
CHH15.6816.242.76 3.72
PLCM21.2714.271.241.33.22

Not many of these stocks pay dividends, as indicated in Table 5 below. Of those that do, all except for MCGC (which has negative EPS) has a reasonably low payout ratio. This suggests the dividends may be sustainable.

Table 5:

TickerDividend YieldPayout Ratio
BNCN2.63%31.40%
FDML
AXS2.82%21.00%
GMCR 0.00%
XRM 0.00%
PRSC 0.00%
MCGC12.04%negative
CYBX 0.00%
CHH2.35%36.44%
PLCM 0.00%

On a historical basis, AXS, GMCR and CYBX have provided a decent ROA, ROE and operating margin (Table 6 below). Note that FDML has been quite negative in the past, but (as indicated above) the street is forecasting a return to profitability. Perhaps this is what Carl Icahn (the buyer) is betting on?

Table 6:

TickerReturn on AssetsReturn on EquityOperating Margin
BNCN0.34%4.99%6.35%
FDML-3.05%-19.07%-3.74%
AXS3.44%11.61%17.03%
GMCR11.18%17.17%14.67%
XRM0.09%7.04%8.10%
PRSC3.06%11.96%2.62%
MCGC-8.77%-17.27%30.23%
CYBX17.04%20.10%27.89%
CHH18.31% 27.79%
PLCM4.89%6.49%6.28%

Finally, the two graphs below illustrates the performance of each stock over the past year. The graph shows a wide range of returns, with some stocks (e.g. GMCR) taking a huge hit.

Opportunity knocks for some.

BNCN Chart

BNCN data by YCharts

PRSC Chart

PRSC data by YCharts

Source: Top Insider Buys From The Past 10 Days

Additional disclosure: Data source: Finviz. This is not advice. While the author makes every effort to provide high quality information, the information is not guaranteed to be accurate and should not be relied on. Investing involves risk and you could lose all your money. Consult a professional advisor before making any investing decisions.