Top 10 Stocks With Big Insider Buying, Buybacks

Updated from 6:30 a.m. EST

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.

The Cheesecake Factory CAKE makes this week's portfolio. The casual-restaurant chain recently increased its stock-buyback plan by 10 million shares. The increase gives the Calabasas Hills, Calf.-based company the capability to repurchase some 17.5 million shares.

In order to finance the planned buybacks, the company said it will tap between $80 million and $90 million in free cash flow it expects to generate in 2008. The company, which operates 139 restaurants, is also negotiating a deal with its lenders to increase its credit line by $50 million to $100 million to fund the buyback.

On Feb. 5, Cheesecake Factory posted fourth-quarter earnings of 22 cents a share, missing Wall Street estimates by 4 cents. Revenue for the quarter rose 13% to $406.3 million but fell short of the $413 million analyst forecast. The company said bad weather conditions resulted in lower-than-expected restaurant traffic, which severely hurt same-store sales.

Analyst Greg Ruedy from Stephens Investment Bankers considers The Cheesecake Factory a "best-of-breed" casual dining operator and maintains his overweight rating on the stock. Since the company missed fourth-quarter expectations, he admits the company is not immune to the challenges in the consumer and commodity environment, but he feels its 2008 business strategy will help. Cheesecake Factory decreased the number of planned restaurant openings in 2008, with plans to invest the extra cash flow in share repurchases.

It's also good to see that a highly regarded investor like Robert Olstein is a believer in CAKE stock. His Olstein Financial Alert Fund OFALX also holds Tyco TYC and Apple AAPL shares.

Level Global is another noteworthy investor that invests in Cheesecake Factory shares. Its principals, David Ganek and Anthony Chiasson, came out of SAC Capital Advisors. The fund also owns shares of Baidu BIDU and National Oilwell Varco NOV.

So with Cheesecake Factory, we have a buyback, an analyst who considers the company "best-of-breed" and two well-known investors in the stock. That makes CAKE a stock worth considering.

Next on the list is Stryker SYK, a medical device company that announced one of the largest buybacks last week. The company's board authorized a $750 million stock-repurchase plan.

The Kalamazoo, Mich.-based company, which specializes in orthopedics, on Jan. 23 posted spectacular quarterly and year-end results. In the fourth quarter, the company earned $278 million, or 66 cents a share, a 21.8% jump from the same period last year. Net sales increased 18.4% to $1.66 billion in the quarter.