When superior investors buy, I pay attention. That's the case today with AutoNation, which superstar stock picker Eddie Lampert, worth $4.5 billion and ranked 68th on Forbes' latest list of America's richest people, has been buying since at least late October.
But those are only the buys we know about. According to this SEC filing, his hedge fund, ESL Investments, owned roughly 50 million shares of AutoNation before this latest buying spree. Lampert has since raised his stake to 52.3 million shares, or 28.4% of the outstanding shares.
For me, there's only one way to interpret that: Lampert thinks the recent decline in AutoNation shares, fueled in part by subprime fears, is unjustified.
That brings me to Allied Capital. A disappointing third-quarter earnings report proved that its problems with Business Loan Express, which came to light in March, could persist for a while. Investors apparently didn't want to hear that; the stock is down nearly 13% since Halloween.
But here's the thing: 10 different insiders have bought stock in Allied since Friday, including CEO William Walton, who added 50,000 shares at $22.83 apiece, boosting his direct stake by 6%.