Stocks With Insider Buying, Buybacks: DTV
James Altucher
05/15/08 - 11:05 AM EDT
Updated from 5:51 a.m. EDT
Part of the philosophy of Stockpickr is to follow in the footsteps of smart people. This could mean a few different things.
Sometimes it means piggybacking great investors such as Warren Buffett or George Soros. Other times it means buying what the CEOs, employees and directors of a company are buying. These are people who know the intimate details of their companies far better than you or I do.
The perfect setup is when one of these company insiders or an entire board (in the case of a stock buyback) is buying shares at the same time that some smart, savvy investors are.
Each Thursday we update the Stockpickr
Top 10 Insider Purchases and Buybacks portfolio, featuring the stocks of the week with either big insider purchases or newly announced buybacks as well as "smart money" accumulating shares.
One of the stocks in this week's portfolio is
DirecTV(DTV Quote - Cramer on DTV - Stock Picks). The El
Segundo, Calif.-based digital TV provider recently announced first-quarter results along
with a plan to increase its buyback program to $3 billion. During
the quarter, the company spent $160 million repurchasing shares.
It didn't offer an expiration date for the buyback.
DirecTV reported impressive first-quarter earnings.
During the quarter, revenue jumped 17% to $4.6 billion; U.S. revenue
increased 14% while Latin America revenue soared 47% to $542 million.
Free cash flow nearly doubled, from $262 million to $505 million. Net
income was $371 million, a 10.4% increase from the $336 million reported
in the same period last year.
Operating performance was exceptionally strong in Latin America, where
the company added 200,000 subscribers during the quarter. The large
subscriber addition and favorable exchange rates forced operating
profit up 73% to $138 million. DirecTV now owns 74% of Sky Brazil,
41% of Sky Mexico and 100% of PanAmericana, which covers the rest of
the region.
President and CEO Chase Carey said: "We expect 2008 to be a year in
which we take DIRECTV to a whole new level in terms of profitability
and cash flow growth. We took an important step toward this goal in
the first quarter as DIRECTV U.S. generated $603 million in cash flow
before interest and taxes, representing a 76% increase over the prior
year."
We like to see that Deutsche Bank reiterated its buy rating on the
stock and increased its price target by $2 to $36. The analysts from
Deutsche Bank believe that DirecTV offers a significant advantage in HD; strong
growth, especially in Latin America; peaking costs; and positive effects
form the buyback. They also believe the stock is trading inexpensively.
Mason Hawkins is a well-regarded investor
who owns DirecTV. He has been in the investment
business for more than 25 years and manages Southeastern Asset Management, which
controls over $31 billion in assets. He recently opened new positions in
Limited Brands(LTD Quote - Cramer on LTD - Stock Picks) and drugstore chain
Walgreen(WAG Quote - Cramer on WAG - Stock Picks).
Another noteworthy firm that likes DirecTV is
Tudor Investment. Founded in 1980 by
Paul Tudor Jones II, the firm currently manages $15.4 billion. Its investment strategies include global macro trading, fundamental
equity investing in the U.S. and Europe, emerging markets, venture
capital, commodities, event-driven strategies and technical trading
systems. It recently bought
Google(GOOG Quote - Cramer on GOOG - Stock Picks) and electric power
company
Entergy(ETR Quote - Cramer on ETR - Stock Picks).
So we have a buyback, excellent
earnings, a buy rating with increased targets, and two successful
investors into the stock. It may be time to take a closer look at
DirecTV.
Next on the list is
Polycom(PLCM Quote - Cramer on PLCM - Stock Picks). The communications equipment maker recently
said its board approved the repurchase of up to $300 million in common
stock. As of March 2008, the company had approximately $80 million
remaining under its previous buyback plan and about 88.5 million shares outstanding. The timing and amount of the repurchases will depend on market conditions.
The Pleasanton, Calif.-based company reported first-quarter revenue
of $258.9 million, compared with $192.7 million for the first quarter of
2007. The company experienced net income of $14.2 million, or 16
cents a share, an increase of 39% from $10.2 million, or 11 cents a
share, in the same period last year. During the quarter, the company
repurchased $60 million worth of its own common stock.
"With our new and incremental $300M share repurchase program announced
today, we reaffirm our confidence in the long term value of the
company and our continued focus on enhancing shareholder value," said
Robert Hagerty, chairman and CEO.
Analysts at Kaufman Brothers reiterated their buy rating on Polycom
because they see upside potential in the stock. They note that
with $352 million in free cash at the end of the first quarter, the
company can easily handle the buyback. The analysts believe that the
current stock price provides an attractive entry point to being a leader
in the video conferencing market and that the company should exhibit strong growth over
the next several years.
We also like to see that one of the most successful hedge funds,
Renaissance Technologies, owns Polycom. Started by Jim Simons in 1982, this $5 billion
fund has averaged 38% annual returns since 1989. It also likes
Lockheed Martin(LMT Quote - Cramer on LMT - Stock Picks) and
GlaxoSmithKline(GSK Quote - Cramer on GSK - Stock Picks).
It's also good to see that
Tygh Capital Management is investing in Polycom. Founded in July 2004 by Richard Johnson and Jeff Curtis, the firm specializes in small-cap and small-mid-cap growth stocks. It also likes engineering software producer
Ansys (ANSS Quote - Cramer on ANSS - Stock Picks) and
Hologic (HOLX Quote - Cramer on HOLX - Stock Picks), a medical
tech company.
So we have a buyback, strong earnings, a buy rating and two remarkable investment firms into the stock. It might be time to do some homework on Polycom.
Finally,
Alliance Data Systems (ADS Quote - Cramer on ADS - Stock Picks) makes this week's list. The Dallas-based transaction services company announced that its board reinstituted its stock buyback program. The company is authorized to repurchase up to $500 million in common stock and currently has approximately 78.5 million shares outstanding.
Alliance Data is also revising its capital structure to determine if the company is using enough debt to maximize value. Decisions regarding the amount of leverage will be made over the next few months.
Alliance Data's chief financial officer, Ed Heffernan, said: "Following the termination of the merger agreement, our focus has been on two items that we believe are critical for future success -- liquidity and earnings visibility."
After Alliance reported strong first-quarter results, SunTrust Robinson Humphrey reiterated its buy rating on the stock and set the price target at $65. The analysts believe ADS is well-positioned to outperform in 2008, and they raised their revenue and EPS estimates to reflect that. They expect 2008 revenue of $2.19 billion and EPS of $4.34.
We also like to see that the
D.E. Shaw group is investing in Alliance Data. With more than 1,000 employees and $50 billion in investment capital, this firm has a significant presence in many of the world's capital markets. In its portfolio, it also holds
General Electric (GE Quote - Cramer on GE - Stock Picks) and
Pfizer (PFE Quote - Cramer on PFE - Stock Picks).
Citadel Investment Group is another superior investment firm that is betting on Alliance Data. The $20 billion Chicago-based hedge fund was founded by billionaire trader Kenneth Griffin. Its other stock picks include
Boeing (BA Quote - Cramer on BA - Stock Picks) and
Union Pacific (UNP Quote - Cramer on UNP - Stock Picks).
So we have a new buyback, a buy rating and two top-of-the-line investment firms putting their money in Alliance Data. That makes for a pretty nice setup.
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 and Jim Cramer's
"Mad Money" Buybacks.
