Stocks With Insider Buying, Buybacks: CVS
James Altucher
05/29/08 - 11:22 AM EDT
Updated from 7:03 a.m. EDTAt Stockpickr.com, we strive to keep track of insider purchasing and buybacks each week. Here's the perfect setup in my mind: Insiders are buying the stock, the company is buying back its own shares, and a super-investor such as
Warren Buffett is 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.
CVS Caremark is in this week's portfolio. The drugstore chain said that it authorized the buyback of up to $2 billion in
common stock during 2008 and 2009. The company added that the
repurchases will be made on a time-to-time basis depending on market
conditions.
On May 1, the Woonsocket, R.I.-based company announced record first-quarter earnings, with profit skyrocketing 83% to $748.5 million, or 51
cents a share, from $408.9 million, or 43 cents a share. Total revenue
jumped 61.7% to $21.3 billion from $13.2 billion. At the end of the
quarter, the company operated 6,267 pharmacies, 56 specialty pharmacy
stores and 26 mail-order pharmacies.
Tom Ryan, chairman, president and CEO, stated: "I'm very pleased with
our results for the quarter. We delivered strong revenue and margin
growth across our businesses that led to earnings at the high end of
our expectations. I'm most excited about the substantial progress we
have made on our new integrated pharmacy benefit management
(PBM)/retail model, which is resonating strongly in the marketplace."
CVS recently partnered with
Google's(GOOG Quote) Google Health to launch a new product that will allow users to securely store and manage their health records
online.
We also like to see that Deutsche Bank has a buy rating on the stock
and a price target of $52. After an analyst meeting on May 22,
Deutsche Bank analysts said: "Based on what we heard, we are
incrementally more confident in CVS's prospects to see further share
gains in both the retail and PBM market."
The
D.E. Shaw Group is a distinguished
international investment fund that's buying shares of CVS. The $50
billion firm targets major industrialized nations, along with
many emerging markets. It is also investing in
Wal-
Mart and
Coca-Cola.
One of the world's largest hedge funds, the
Citadel Investment Group, is also
an owner of CVS stock. This $20 billion Chicago-based
fund was founded by Kenneth C. Griffin and is known for its daily
trading volume, which amounts to 1% to 2% of daily trading activity in New
York and Tokyo. From inception through 2006, Citadel Investment Group
achieved an annualized net return of approximately 25%, making it
one of the best-performing hedge funds within that period. Its
other stock picks include
Kroger and
Marvell Technology.
So we have a buyback, record high earnings, a buy rating and two
highly regarded investors into the stock. It may be time to take a
closer look at CVS.
Lexmark also makes this week's list. The Lexington,
Ky.-based manufacturer of printing products said that its board
authorized the repurchase of up to $750 million in common stock. The
company did not offer an expiration date for the buyback. This new
repurchase plan raises the company's total repurchase amount to $4.65
billion from $3.90 billion. Lexmark has approximately $250 million
left over from the previous buyback plan; therefore, the company has
about $1 billion available for repurchase.
Lexmark reported a slow first quarter and experienced a 7% drop in
revenue, from $1.26 billion to $1.18 billion. On a positive note, the
company reported 12.5% year-over-year growth in GAAP EPS and generated
$178 million in cash.
"Our first-quarter results reflect the strategic shift that we began
in the second half of 2007," said Paul J. Curlander, Lexmark chairman
and CEO. "Although EPS greatly exceeded expectations in the first
quarter and we had good cash generation performance, we have more work
to do as we continue to implement our strategy to drive our growth in
higher-usage segments."
During the quarter, Lexmark was presented with several awards of
excellence from respected testing labs and technology publications,
exhibiting its initiative to increase its presence in high-growth
color laser printer and color multifunction product segments.
The Lexmark C530dn and C780n were added to
PC World magazine's Top 10
Color Laser Printers list. Another printer, the Lexmark X560n, was awarded a
"four-star, highly recommended" rating from independent test lab Bertl.
Yet another, the Lexmark X500n, was named a Top Five
Color Laser Multifunction Printer by
PC World.
Its also good to see that
Renaissance Technologies
holds Lexmark in its portfolio. This New York-based hedge fund was started by
Jim Simons in 1982. Its $5 billion Medallion Fund has averaged 38%
annual returns, after fees, since 1989 and is considered in the
industry to be the most-successful hedge fund. The fund also likes
Johnson & Johnson and alcohol producer
Diageo.
Another remarkable hedge fund,
Maverick Capital, is also investing in
Lexmark. It has long been known as one of the largest and most
consistently successful hedge funds. It was started in 1993 with $38 million
in capital by Lee S. Ainslie III, who was a protege of the legendary
investor Julian Robertson at Tiger Management, one of the most
successful hedge funds in history. The fund recently added
Starbucks and pharmaceutical company
Wyeth to its portfolio.
So we have a buyback, decent earnings and two excellent hedge funds
that have their money in the stock. It may be time to do some
homework on Lexmark.
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.
