Stockpickr
Return to Article

Top Stocks With Insider Buying, Buybacks

James Altucher

03/27/08 - 11:08 AM EDT
Updated from 7:07 a.m. EDT

At Stockpickr.com, we strive to keep track of insider purchasing and buybacks each week. Here's the perfect setup in my mind: insiders buying the stock, the company buying back its own shares and a super-investor like Warren Buffett also buying shares. If I can get three out of three, I'm in heaven. If I can get two out of three, or even one out of three, I'm still pretty happy about the situation, particularly if the stock is cheap in other ways as well.

Each Thursday we update the Stockpickr Top 10 Insider Purchases and Buybacks portfolio, featuring stocks that recently have seen big insider purchases or new buyback programs as well as super investors accumulating shares.

Qualcomm QCOM makes the list thanks to a new $2 billion stock-buyback program the San Diego-based company initiated a couple of weeks ago. This new plan replaces the company's previous $3 billion buyback, which has just $2 million of buying power remaining.

The world's second-largest maker of cell-phone chips also said that it will increase its quarterly dividend 14% to 16 cents from 14 cents a share. Since 2003, the company has returned $8.5 billion to shareholders through buybacks and cash dividends.

On Jan. 23, Qualcomm reported first-quarter earnings of 46 cents a share, a 21% jump from the same period last year. During the quarter, the company earned $767 million, an 18% year-over-year increase, and revenue of $2.44 billion. The quarter was highlighted by strong demand for cell phones with Internet access that allow the user to download music and videos. The impressive results came against legal battles with rival Broadcom BRCM, which ban Qualcomm from selling some chips that infringe on Broadcom patents.

Oppenheimer Research expects Qualcomm's earnings to improve over the next 12-18 months and raised its price target for the stock from $46 to $52. The firm is positive on the stock because the company's legal battles should be clearing up soon, it continues to gain market share in 3G chips, and has the potential for robust EPS growth due to strong demand for smartphones.

We also like Qualcomm because Moore Capital owns the stock. Moore Capital is a group of hedge funds with more than $10 billion in assets run by famed trader Louis Bacon. Moore recently opened positions in CA CA and Teradata TDC.

Duquesne Capital is another noteworthy fund that holds Qualcomm shares. The $4 billion investment fund was started by Stanley Druckenmiller, a protege of George Soros. The fund also likes JPMorgan JPM and Suncor Energy SU.

So with Qualcomm, we have a buyback, increased dividend, price targets $12 north of where the stock trades now and two well-known investors in the stock. It may be time to take a closer look at Qualcomm.

Next on the list is American Tower AMT. The wireless and broadcast communications infrastructure company recently announced a plan to repurchase up to $1.5 billion in common stock.

The Boston-based company also provided a full-year 2008 outlook with rental and management segment revenue between $1.52 billion and $1.54 billion. Network development services segment revenue is projected to be in the range of $35 million to $50 million and income from operations during 2008 is expected to be between $126 million and $143 million.

Adding to the case for American Tower is that Martin Sosnoff, of Atalanta Sosnoff Capital, is invested in the stock. The $5 billion private investment company also recently bought shares of General Dynamics GD and Medtronic MDT .

Another reason we like American Tower's stock is because D.E. Shaw Group believes in the company. The $50 billion firm also holds shares of Apple AAPL and Caterpillar CAT.

So with American Tower, we have a buyback, a reaffirmed 2008 outlook and two well-known investors in the stock. That makes American Tower a stock worth considering.

And finally, we have NYSE Euronext NYX making this week's list. The stock-market operator last week said it will repurchase up to $1 billion in common stock.

On top of the buyback, the company also increased its annual dividend 20% to $1.20 from $1 a share, in an effort to reach its target dividend payout ratio of 35% to 45% of net income.

NYSE further announced solid fourth-quarter results that showed adjusted profit had climbed 39% to $175 million, or 66 cents a share, which was in line with analyst forecasts. Most of the growth is due to the acquisition of Euronext, the European market operator, but additional strength came from record transaction volumes. Total revenue for the period rocketed 79% to $1.18 billion.

It's also good to see that Third Point is invested in NYSE shares. This $5.5 billion hedge fund's other recent investments are Plains Exploration & Production Company PXP and packaging company MeadWestvaco .

Another notable fund that likes NYSE stock is Atticus Capital. Founded in 1995 by Timothy Barakett, this firm also expects future gains in Baidu.com BIDU and Research In Motion RIMM.

So with NYSE Euronext we have a buyback, increased dividends, substantial earnings growth and highly regarded investors into the stock. That's a solid foundation on which to take a harder look at NYSE Euronext.

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.