Skip to main content

Stockpickr: How to Buy Like an Insider

Check out these big insider buys and share buybacks.

Part of the philosophy behind Stockpickr is to follow in the footsteps of smart people.

Sometimes that means buying the same names that a great investor like Warren Buffett or George Soros is buying. 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 company far better than you or I. If they are buying shares, either directly on the open market or through a shareholder buyback, then it bears consideration.

Each week the folks at Stockpickr sort through all of the regulatory filings that detail the latest insider buying and share buybacks. We select the 10 situations that are most interesting for various reasons we describe -- every case is different. Each Thursday we will list those picks on Stockpickr's

Top Insider Purchases and Share Buybacks

.

Let's first take a look at

Bisys Group

(BSG)

, a company that offers a direct play on the increasing institutionalization of hedge funds, not to mention the general growth of mutual funds, financial planning firms and every aspect of the financial services industry. Basically, Bisys provides the back-office and administrative work for the hedge fund industry, financial services firms and even a large segment of the insurance industry.

Ahmet Okumus, founder of Okumus Capital, owns more than 10% of the company and has pretty much taken an activist role there. So far this month he's bought another 150,500 shares, or $1.7 million worth of the company, to add to the 13 million shares he already owns. In addition, he's insisting on a board seat.

Okumus understands more than anyone the growth of the industry he's been a pioneer in for the past 10 years, and he knows the growth that Bisys has been experiencing. He's accumulated his entire 10%-plus stake since February.

Meanwhile, Bisys announced last year it would put itself up for sale, but it has yet to find a buyer. After the company posted weaker-than-expected earnings last month, AG Edwards put out a sell rating on the stock. In other words, everyone hates it. Except one of the best investors ever.

Okumus Capital has yet to have a down year and has been averaging returns of more than 20% since its inception 10 years ago. Ahmet Okumus was also featured in Jack Schwager's bestseller

Stock Market Wizards: Interviews with America's Top Stock Traders

. Okumus is a deep value investor, buying stocks with low multiples over earnings and tangible book value.

TheStreet Recommends

For the rest of Okumus' holdings, including

Arbitron

(ARB)

and

Expedia

(EXPE) - Get Expedia Group, Inc. Report

, check out the

Okumus Capital page

on Stockpickr.

In terms of share buybacks, there's

Supervalu

(SVU)

. The quietly growing grocery giant last week authorized a $235 million buyback, replacing its prior plan. And its acquisition of the Albertsons grocery chain helped Supervalu deliever fiscal fourth-quarter earnings of $119 million, or 57 cents a share, soundly beating its year-ago profit of $6 million, or 4 cents a share.

Supervalu is also one of

Jim Cramer's favorite grocery-chain stocks

.

In an April 20

RealMoney

blog post about Supervalu's fiscal fourth-quarter resuts, Cramer wrote: "I know that stock was up a lot going into the quarter, but you have at least another year's worth of similar growth off of

Wal-Mart's

fall and Albertsons rebirth."

Another intriguing aspect to Supervalu is that it's a component of the Claymore/Sabrient Defender ETF. This is an exchange-traded fund made up of stocks that meet two criteria:

  • Stocks that outperformed other stocks on weak market days in the last quarter. In other words, if a stock was up every day the market was down, it was a good contender for the ETF.
  • Stocks with strong balance sheets, possible dividends and good earnings growth.

For other Defender stocks, including

H.J. Heinz

(HNZ)

and

EchoStar Communications

(DISH) - Get DISH Network Corporation Class A Report

, check out the

Claymore/Sabrient Defender ETF

page on Stockpickr.

Supervalu was also mentioned in a recent

Barron's

profile of hedge fund Cypress Capital. In the column, manager Richard Arvedlund said of Supervalu: "It's a defensive name in a sector where unit growth will continue fairly steady and won't be impacted by economic trends."

It's worth noting that Arvedlund is very bearish on the U.S. economy and constructed his portfolio accordingly to take advantage of the stocks he believes will go up regardless. Some of his other picks include

Verizon

(VZ) - Get Verizon Communications Inc. Report

, which he thinks will raise its dividend and easily refinance its debt, and

JetBlue

(JBLU) - Get JetBlue Airways Corporation Report

, which he feels is sensitive (positively) to a decline in oil prices.

For the rest of the fund's holdings and bets for a declining U.S. economy, check out the

Cypress Capital portfolio

on Stockpickr.

Investments made by insiders offer some important clues about the direction of these companies. Piggybacking those investments can lead to outperformance.

At Stockpickr, we keep track of these situations by identifying recent purchases and buyback plans. We also try to find names with shareholder activists, low multiples and other favorable attributes. For the rest of Stockpickr's picks of the week, visit the

Top Insider Purchases and Share Buybacks

page.

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 a managing partner at Formula Capital, an alternative asset management firm that runs several quantitative-based hedge funds as well as a fund of hedge funds. He is also the author of

Trade Like a Hedge Fund

and

Trade Like Warren Buffett

. 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.

TheStreet.com has a revenue-sharing relationship with Trader's Library under which it receives a portion of the revenue from purchases by customers directed there from TheStreet.com.