Problems with the mortgage and credit markets may have many individual investors worried but insiders appear confident in a turnaround. During the past eight weeks, insiders have been net sellers of a very low $300 million daily, according to their form 4 filings with the SEC. This number is down from a $470 million per day average since problems arose in July.

So, what stocks are insiders buying the most? The answer: banks and insurance companies. That's right - insiders are buying up the same stock that rest of the market is selling! In fact, not since 1995 have so many chief executives bought so many shares in their own companies as in this month. Many analysts see this as a strong buy signal and a clear indication that they are confident in a turnaround.

Among the biggest buyers were chief executives in companies like Wachovia (NYSE:WB), American Express (NYSE:AXP), CIT Group (NYSE:CIT), and American Capital Strategies (NDAQ:ACAS). Meanwhile, several mutual funds have increased their exposure in these same companies betting alongside insiders that shares will recover from their current extremely discounted levels.

In the end, the best opportunities are always present once blood is on the streets. The public is afraid, hedge funds have sold out, and now insiders are on the move buying up all the cheap shares. Opportunistic investors may now want to do the same while shares are still cheap...

Related Companies
Wachovia (WB)
American Express (AXP)
CIT Group (CIT)

Tyco Electronics (NYSE:TEL) is finally beginning to catch the attention of value investors after its rough start as a public company. The Tyco spinoff is trading well off of its initial offering price, continues to be valued below its peers, and has only one analyst recommending a buy. So, why is Tyco Electronics a stock worth watching? Let's take a look...

Tyco Electronics shares are currently trading around 10% below its initial offering at around $36.50. The stock is trading at around 16x forward earnings compared to an industry average 21x, which means it is trading at a discount to its peers. This is despite a healthy cash flow with a 6% free cash flow yield. So fundamentally, this company is relatively healthy and trading at a discount to its peers.

Tyco Electronics has also seen some significant insider buying this month. Thomas Lynch purchased almost $680,000 worth of stock on August 13th while two other insiders purchased an addition $110,000 worth of stock shortly afterwards. Meanwhile the company has seen no insider selling, which indicates that insiders are confident in future prospects.

Finally, Tyco Electronics is unique in that it is a spinoff company, which have historically outperformed the overall stock market. A Thompson Financial study of spinoffs dating back to 1996 found that the average spinoff company fell during the first month but recovered to an 8% gain after six months and a 12% gain after twelve months. These returns are far in excess of average stocks!

This tendency is attributed to the fact that parent company shareholders often do not want shares in the new company and sell their shares. This unjustified selling pressure pushes down share prices despite decent fundamentals, which creates buying opportunities in the early months after a spinoff. Tyco Electronics is no different; however, the current market conditions have pushed this move even lower despite decent fundamentals. And this has created a great value play that investors are just now starting to notice!

Related Companies
Tyco International (TYC)
Johnson & Johnson (JNJ)
Protection One Inc. (PONE)

H&R Block (NYSE:HRB) shareholders are gearing up for this years September 6th board meeting where they will be faced with a decision whether or not to vote for incumbent board members or a new slate of three directors proposed by ex-SEC head Richard Breeden's hedge fund, Breeden Capital Partners. Shareholders are hoping that these new directors can implement a series of changes designed to jump the company's stagnant share price.

Richard Breeden, who owns a 1.8% stake in the company, has attracted widespread support for his proposal to narrow the company's focus to just tax preparation services by divesting everything else. The company's long history of failed diversification efforts has frustrated many investors and led to a stagnant share price that has many ready for change. Among other things, Breeden demanded that the company shut down its thrift division and focus on selling off its mortgage businesses while focusing on tax preparation services.

Unfortunately, the poor credit markets might prove to be a hurdle for any move to divest. H&R Block's current deal to sell its One Mortgage unit to Cerberus Capital Management was recently delayed until December 31st, which has many worried that the deal will fall through. Meanwhile, many other financial and strategic buyers are finding it very difficult to obtain financing. The company's business units may also prove to be too small for spin-offs onto the public market.

Shareholders and analysts seem unphased, however, after three proxy advisory services recently came out in support of his candidates while other activists holding a cumulative 15% of the outstanding shares are also expected to vote in favor of change. Whether or not Breeden is successful remains to be seen; however, this is definitely a stock to watch given his past success in activist situations!

Related Companies
Intuit Inc. (INTU)
Jackson Hewitt Tax Services (JTX)
Ameriprise Financial (AMP)