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Top 10 Stocks With Big Insider Buying, Buybacks

James Altucher

02/21/08 - 11:32 AM EST
Updated from 6:13 a.m. EST

One of the primary goals of Stockpickr.com is to allow everyday investors to see what the big guns are buying. Often times, we see a big-name investor loading up on a particular stock. This is usually a good sign because you know that person put a lot of time and due diligence into that process. Plus, high-profile investors have bankers, lawyers and consultants breaking down the business every which way imaginable.

The real icing on the cake, however, is when that same company announces that an insider has purchased a large chunk of stock or even better, the board initiates a new, large share-buyback program.

That's why each Thursday at Stockpickr we update the Top 10 Insider Purchases and Buybacks portfolio, featuring the stocks that recently have had either big insider purchases or newly announced buybacks, as well as super-investors accumulating shares.

McAfee (MFE Quote - Cramer on MFE - Stock Picks) makes this week's portfolio. The computer software maker has set in place a new $750 million stock buyback plan, higher than the $500 million program analysts had expected.

The Santa Clara, Calif.-based company also just reported solid fourth-quarter earnings and provided guidance exceeding Wall Street expectations. In the fourth quarter, net sales jumped to $356.5 million from $305.2 million a year ago, helped by 24% growth in its international business. Net income for the period, excluding items, was $75.1 million, or 46 cents a share, a penny above analyst estimates. For the full year, net income grew 21% to $167 million, or $1.02 a share, from $137.5 million, or 84 cents a share, last year.

CEO David DeWalt noted that while he does "worry a little bit about the macro [economic] climate, particularly consumers ... we've been doing well. We've got new partnerships and a bunch of new contracts that keep us going."

Analysts were more than pleased with the news of solid fourth-quarter and full-year performances topped off by solid guidance.

Daniel Ives of FBR Research noted, "While macro uncertainty remains a concern, McAfee is not seeing any signs of weakness in the field, which echoes positive comments we have heard from other security software vendors over the last few weeks."

Katherine Egbert of Jeffries & Co. also pointed out that "we believe that McAfee is attractive at current levels, especially given the relative economic safety of the core security franchise." She has a buy rating and a $43 price target, noting not just guidance but also the buyback.

It's also good to see a successful investor like Moore Capital invested in McAfee stock. The fund, run by famed investor Louis Bacon, also holds Cisco (CSCO Quote - Cramer on CSCO - Stock Picks), another recent buyback play, and Intel (INTC Quote - Cramer on INTC - Stock Picks).

We also like that McAfee is in the portfolio of the BlackRock Large-Cap Growth Fund. This four-star Morningstar-rated fund also owns Hewlett-Packard (HPQ Quote - Cramer on HPQ - Stock Picks) and IBM (IBM Quote - Cramer on IBM - Stock Picks).

So with McAfee, we have a buyback, solid earnings and guidance, some buy ratings and two successful investors in the stock. It may be time to take a closer look at McAfee.

Next on the list is Seagate Technology (STX Quote - Cramer on STX - Stock Picks). The disk-drive maker's board recently authorized the company to buy back $2.5 billion in stock and a 20% hike in its quarterly dividend.

The Cayman Islands-based comapny also recently reported stellar second-quarter earnings. Earnings nearly tripled for the quarter ended Dec. 28 as the company reported $403 million in income, or 73 cents a share, up from $140 million, or 23 cents a share, in the year-earlier quarter. Shipments were up more than 20% year over year, and the company said it could have been even more given the robust demand.

However, the stock has been volatile lately as some analysts feel macro conditions may cause problems for the company going forward.

David Bailey from Goldman Sachs recently wrote that, "hard drive industry fundamentals remain favorable, but softening macro conditions will remain an overhang for tech stocks overall and, with end-of-year tailwinds behind us, there is an absence of catalysts to drive Seagate shares higher in the near term." As a result, Goldman removed Seagate from its Conviction List but did maintain a buy rating on it.

We like to see that Duquesne Capital, a $4.5 billion fund started by Stanley Druckenmiller, owns STX shares. Druckenmiller went to work for George Soros in 1988 and his timely long and short positions helped generate a string of 30% returns for Soros' Quantum Fund. Duquesne also owns shares of Microsoft (MSFT Quote - Cramer on MSFT - Stock Picks) and Akamai (AKAM Quote - Cramer on AKAM - Stock Picks).

We also like to see that Seagate is part of the T. Rowe Price Mid-Cap Value Fund. This fund has a Morningstar rating of five stars and is run by David Wallack. Some of its other top holdings include Sun Microsystems (JAVA Quote - Cramer on JAVA - Stock Picks) and XM Satellite Radio (XMSR Quote - Cramer on XMSR - Stock Picks).

So with Seagate, we have a buyback, solid earnings and two well-known investors into the stock. Time to do some homework here.

For more stocks and analysis, check out this week's Top 10 Insider Purchases and Buybacks at Stockpickr.com.

For the 10 most recent portfolios, check out:

You can also review Barron's Top Insider Purchases from the prior week as well as Cramer's "Mad Money" Buybacks.