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Tickers in this Article: COH, GE, NDN, EMN, PZZA, JCP, M
Conscientious investors spend a fair amount of time poring over a company's financials. They may calculate price-to-earnings ratios or price-to-cash flow ratios, and will consider a myriad of company-specific news prior to making an investment decision. Though these are all good ways of judging a company's stock, it seems that insider activity receives very little attention from would-be investors. (To learn more about the concept of keeping tabs on company executives, read Delving Into Insider Investments.)

It's too bad that insider buying is often overlooked, as it can provide important cues. After all, I can't think of too many reasons why an insider would purchase shares unless they thought they had a reasonable chance of making money in the future.

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With that in mind, I screened companies with recent insider buying. I think these companies worthy of further research, so let's take a look.

Market Capitalization
Insider Buyers During Past 12 Weeks
99 Cents Only
$612.0 million
Coach, Inc
$4.7 billion

Eastman Chemical
$1.7 billion

General Electric
$101.6 billion
Papa John\'s
$658.3 million
Data as of March 16, 2009 Intraday

Since Coach stocks are currently trading at low prices, I'd like to focus on this company in a little more detail.

Thinking Like an Insider
Coach, a company known for its glamorous hand bags, has clearly seen better days. After all, its stock is off more than 47% over the past 52-weeks. That's steeper than the drop experienced by the S&P 500.

However, some insiders seem convinced that the shares are a good deal. A quick look at the insider data, which breaks down the action, shows that officers Todd Kahn, Michael Tucci, and Lew Frankfort have all bought the stock since the beginning of February. The total number of shares purchased comes to 66,000, and to me that seems like a pretty big vote of confidence.

It also makes me wonder what they're so excited about. While I can't speak for the aforementioned insiders, the New York-based company's stock sure looks cheap.

Positive Outlook
What stands out most is that in spite of worries that consumers won't be buying higher-end items in this sluggish economy, the company is still expected to earn $1.86 a share in the current year and $1.72 a share next year. That's especially impressive given the economic climate. Bargain hunters may also be interested to know that the company trades at a lowly 7.9 times the current year estimate, which seems pretty darn cheap given that it's also expected to grow 13% per annum in the next five years.

The Bad News
With all of this good news, it's important to mention that the company didn't have a stellar quarter. In the second quarter, which ended December 27, its sales dropped about 1.8% from $978 million in the comparable period last year to roughly $960.3 million. Moreover, its North American comps were off 13.2%. However, there was a positive in the company's release: Coach spent a lot of money to repurchase shares. In fact, Coach bought back and retired more than six million shares in the period. Also, the company earned 67 cents per share, which was in line with expectations.

I don't want anyone to believe that I am a wide-eyed optimist here - I do think that this year will be a volatile one. Middle-of-the-road retailers that sell handbags, like JCPenney (NYSE:JCP) and Macy's (NYSE:M), continue to struggle, which is evidence that the sector has not yet stabilized. JCPenney is expected to lose money in the current year, while Macy's trades at about 15.4 times the current year estimate. (For further reading on investing in stocks such as these, be sure to read Analyzing Retail Stocks.)

Bottom Line
I believe that insider buying is a valuable thing to consider. After all, it's tough to think of a reason why an insider would purchase stock if he or she didn't expect to make some money from it in the future.

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