Stocks With Insider Buying, Buybacks: CVS

Large repurchases make CVS and Lexmark stocks to watch.
By James Altucher ,

Updated from 7:03 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 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

(CVS) - Get Report

is in this week's portfolio. The drugstore chain said that it authorized the buyback of up to $2 billion incommon stock during 2008 and 2009. The company added that therepurchases will be made on a time-to-time basis depending on marketconditions.

On May 1, the Woonsocket, R.I.-based company announced record first-quarter earnings, with profit skyrocketing 83% to $748.5 million, or 51cents a share, from $408.9 million, or 43 cents a share. Total revenuejumped 61.7% to $21.3 billion from $13.2 billion. At the end of thequarter, the company operated 6,267 pharmacies, 56 specialty pharmacystores and 26 mail-order pharmacies.

Tom Ryan, chairman, president and CEO, stated: "I'm very pleased withour results for the quarter. We delivered strong revenue and margingrowth across our businesses that led to earnings at the high end ofour expectations. I'm most excited about the substantial progress wehave 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) - Get Report

Google Health to launch a new product that will allow users to securely store and manage their health recordsonline.

We also like to see that Deutsche Bank has a buy rating on the stockand a price target of $52. After an analyst meeting on May 22,Deutsche Bank analysts said: "Based on what we heard, we areincrementally more confident in CVS's prospects to see further sharegains in both the retail and PBM market."

The

D.E. Shaw Group

is a distinguishedinternational investment fund that's buying shares of CVS. The $50billion firm targets major industrialized nations, along withmany emerging markets. It is also investing in

Wal-Mart

(WMT) - Get Report

and

Coca-Cola

(KO) - Get Report

.

One of the world's largest hedge funds, the

Citadel Investment Group, is alsoan owner of CVS stock. This $20 billion Chicago-based fund was founded by Kenneth C. Griffin and is known for its dailytrading volume, which amounts to 1% to 2% of daily trading activity in NewYork and Tokyo. From inception through 2006, Citadel Investment Groupachieved an annualized net return of approximately 25%, making itone of the best-performing hedge funds within that period. Itsother stock picks include

Kroger

(KR) - Get Report

and

Marvell Technology

(MRVL) - Get Report

.

So we have a buyback, record high earnings, a buy rating and twohighly regarded investors into the stock. It may be time to take acloser look at CVS.

Lexmark

(LXK)

also makes this week's list. The Lexington,Ky.-based manufacturer of printing products said that its boardauthorized the repurchase of up to $750 million in common stock. Thecompany did not offer an expiration date for the buyback. This newrepurchase plan raises the company's total repurchase amount to $4.65billion from $3.90 billion. Lexmark has approximately $250 millionleft over from the previous buyback plan; therefore, the company hasabout $1 billion available for repurchase.

Lexmark reported a slow first quarter and experienced a 7% drop inrevenue, from $1.26 billion to $1.18 billion. On a positive note, thecompany 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 beganin the second half of 2007," said Paul J. Curlander, Lexmark chairmanand CEO. "Although EPS greatly exceeded expectations in the firstquarter and we had good cash generation performance, we have more workto do as we continue to implement our strategy to drive our growth inhigher-usage segments."

During the quarter, Lexmark was presented with several awards ofexcellence from respected testing labs and technology publications,exhibiting its initiative to increase its presence in high-growthcolor laser printer and color multifunction product segments.

The Lexmark C530dn and C780n were added to

PC World

magazine's Top 10Color 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 FiveColor Laser Multifunction Printer by

PC World

.

Its also good to see that

Renaissance Technologiesholds Lexmark in its portfolio. This New York-based hedge fund was started byJim Simons in 1982. Its $5 billion Medallion Fund has averaged 38%annual returns, after fees, since 1989 and is considered in theindustry to be the most-successful hedge fund. The fund also likes

Johnson & Johnson

(JNJ) - Get Report

and alcohol producer

Diageo

(DEO) - Get Report

.

Another remarkable hedge fund,

Maverick Capital, is also investing inLexmark. It has long been known as one of the largest and mostconsistently successful hedge funds. It was started in 1993 with $38 millionin capital by Lee S. Ainslie III, who was a protege of the legendaryinvestor Julian Robertson at Tiger Management, one of the mostsuccessful hedge funds in history. The fund recently added

Starbucks

(SBUX) - Get Report

and pharmaceutical company

Wyeth

( WYE) to its portfolio.

So we have a buyback, decent earnings and two excellent hedge fundsthat have their money in the stock. It may be time to do somehomework 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

.

At the time of publication, Altucher and/or his fund had no positions in stocks mentioned, although positions may change at any time.

James Altucher is president of

Stockpickr

LLC, a wholly owned subsidiary of TheStreet.com and part of its network of Web properties, and a managing partner at Formula Capital, an alternative asset management firm that runs a fund of hedge funds. He is also a weekly columnist for the

Financial Times

and the author of

Trade Like a Hedge Fund

,

Trade Like Warren Buffett

and

SuperCa$h

. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Altucher appreciates your feedback;

click here

to send him an email.

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