Insiders Signal Buys at Pool, Avid

Ever since I first worked with RealMoney contributor Jonathan Moreland back in 1999, I've been intrigued by stocks that show insider buying; arguably, no one really knows more about a company's prospects than its executives.

However, as with any investor, insiders don't always have perfect timing with their buys. Because of this, when I do venture down the insider path, I always dig deeper into the company's financial prospects to look for other reasons the stock is worth owning.

I've found two names that have seen recent insider buying that look attractive to purchase at current levels, Pool (POOL - commentary - Cramer's Take) and Avid Technology (AVID - commentary - Cramer's Take).

Pool is the world's largest distributor of swimming pool supplies. At Wednesday's closing price of $37.87, the stock is up 1.8% year to date, but 25% off its 52-week high. According to an SEC filing, company board chairman Wilson Sexton bought 5,000 Pool shares on the open market Aug. 25. This is in addition to 38,000 shares purchased by two directors in July.

Management also spent $50 million of the company's cash to buy back shares in the second and third quarters. Pool announced another $50 million repurchase authorization Aug. 9. It's also worth noting that the company pays a 10.5-cent quarterly dividend, to be distributed next on Sept. 5.

At current levels, the company trades at 20.9 times expected 2006 profit of $1.81 a share. That multiple is on track with Pool's projected earnings growth this year, though the rate of improvement has decelerated two straight years.

In looking at the trading action in Pool shares over the past several years, it's interesting to note the stock has consistently moved lower throughout the spring and summer months. That said, the shares also have tended to bottom out in the fall and rally in what's considered the company's off-season.

---

David Peltier is a research associate at TheStreet.com In keeping with TSC's editorial policy, he doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Peltier appreciates your feedback; click here to send him an email.

Interested in more writings from David Peltier? Check out his newsletter, TheStreet.com Dividend Stock Advisor. For more information, click here.