http://seekingalpha.com/article/1103...

When we research stocks for our investment management clients, insider purchases play an important role in our research. Why? Quite simply because insiders almost always know more about the business than any analyst could ever know.

Obviously we cannot - and do not - rely solely on insider purchases, but we feel that it is a very good way to find potentially great companies to invest in.

Aligning incentives

Insider buying absolutely indicates an upbeat management team, but it also aligns the incentives of management with those of the owners (shareholders). Management teams that have a significant monetary stake in the performance of the company - through ownership of stock - are far more likely to increase shareholder value more effectively and efficiently than those who do not.

Here are some significant insider purchases that we ran across during our research that we believe warrant further investigation:

Visa, Inc.

Since its initial public offering (IPO) in early 2008, Visa (V) shares are currently 40% below their 52-week high of $89, but still 22% above the listed IPO price of $44 per share. Just yesterday, Visa Chief Executive Joseph Saunders re-iterated the Company’s guidance of 20% growth in 2009, and an adjusted operating margin in the mid-to-high 40 percent range.

Considering the economic conditions in the credit market - and the global economy as a whole - this guidance is extremely positive for the company. Furthermore, Visa is not exposed directly to rising defaults because it does not issue cards directly, similar to Mastercard (MA), but unlike American Express (AXP), Bank of America (BAC), Capital One (COF), Citigroup (C), and JP Morgan (JPM).

It’s no surprise, then, that in December alone, insiders - including Joseph Saunders - have purchased more than $1.1 million worth of stock on the open market.

Allied Nevada Gold Corp.

As we discussed in an earlier article, Gold to $2,000 by 2009? Citigroup Thinks So., we believe that gold could be a great investment to weather the economic downturn, and suggested investors take a look at Yamana Gold (AUY), Kinross Gold Corp (KGC), and GoldCorp (GG) or any number of individual gold stocks.

One additional gold explorer and producer that caught our attention this week was Allied Nevada Gold Corp. (ANV) when a director for the company, Robert Mackay Buchan, reported that he had bought more than $800,000 worth of the stock on the open market back in October, at prices similar to the $3.55 per share we saw on Wednesday.

As always, the companies mentioned in this article should NOT be taken as recommendations, but rather as a list of companies that merit further research.