Part of the philosophy behind Stockpickr is to follow in the footsteps of smart people. To that end, we keep track of the Top 10 Insider Purchases and Buybacks each week.
Following in the footsteps of smart people means different things. It could mean piggybacking great investors such as Warren Buffett or George Soros.
Or it could mean buying when company executives, employees and directors are picking up shares. These are people who know the intimate details of their company far better than you or me. If they are bullish on the company, there's probably a good reason for it.
The perfect setup, of course, is when a stock experiences a combination of these endorsements -- when these company insiders, or an entire board via a buyback, are buying up shares at the same time that some savvy investors are placing their bets.
Each Thursday we update the
portfolio, a list of 10 stocks that in the past week have had either big insider purchases or newly announced buybacks as well as super investors accumulating shares.
is part of this week's portfolio. The Bentonville, Ark.-based discount retailer recently announced a $15 billion stock buyback program, and late last week it said that it will cut capital spending and pare back its store growth.
"We are committed to improving return on investment, while continuing to grow in the United States," CEO Lee Scott, who has been under fire for the stock's poor performance in recent years, said in statement. The "announcement of this strategy and the share repurchase program underscores Wal-Mart's commitment to returning value to our shareholders."
The company said it expects to add 190 to 200 new U.S. supercenters during this fiscal year and about 170 supercenters each year for the next three fiscal years. Wal-Mart had previously targeted the opening of between 265 and 270 U.S. supercenters this year.
The stock was subsequently upgraded by several institutions, including J.P. Morgan's Charles Grom, who noted: "While some of our concerns still exist and same-store sales could stay depressed near term, we think investors will now approach these factors with a 'glass half-full' mentality -- in essence giving Wal-Mart a free pass for much of 2007."
Grom also added that he expects the buyback to support earnings per share significantly through 2008. Another analyst, HSBC's Mark Husson, upped his price target for Wal-Mart shares from $53 to $61.
On top of the buyback program and cut in capital spending, you also have to believe that a lot of the "gloom and doom" surrounding Wal-Mart is already priced into the stock.
It's also good to see the likes of Ahmet Okumus believing in the stock. His Okumus Capital has yet to have a down year and has been averaging 20%-plus returns since its inception 10 years ago. Okumus, who was featured in
by Jack Schwager, is a deep value investor, buying at low multiples over earnings. For the rest of Okumus' holdings, including
, check out the
Another Wal-Mart shareholder is
, an insurance company that is often called a "mini-Berkshire Hathaway." In fact, many of its investments overlap with
So with Wal-Mart, we have a buyback, a cutback in capital spending, analyst upgrades
-- including increased price targets -- and two well-known value investors in the stock. Despite all the negative press lately, it may be time to take a closer look at Wal-Mart.
The first reason we looked at
was because we saw that Eugenio Clariond, the company's chairman of the board, has recently purchased 34,100 shares, or nearly $1.5 million worth of stock.
Akamai, the Cambridge, Mass.-based digital storage and delivery provider, recently announced that its first-quarter profit spiked by nearly 67% on strong revenue growth year over year. The company also reiterated its full-year outlook. This met analyst expectations, but shares took a beating.
As Tim Klasell, an analyst with Thomas Weisel, put it, "Although Akamai reported a solid quarter with year-over-year organic revenue growth in excess of 44%, according to our estimates, we believe investors have come to expect a solid beat and raise of guidance almost every quarter. ... Although Akamai has superior growth to most stocks in the comparable group, we believe upside will be limited until investor expectations wane."
But Klasell still has a $50 price target, which would imply a nearly 18% return from current levels.
So with Akamai, we have a great quarter and a nice price target from an analyst, but a stock that may not go anywhere because of investor expectations. We like the first two points and don't care too much about the latter. What we do like, however, is that Stanley Druckenmiller, who runs
, owns Akamai.
Druckenmiller went to work for his hero
in 1988 and is famous for orchestrating Soros' billion-dollar raid on the British pound in 1992. Druckenmiller also is a big fan of
It is also nice to know Akamai was recently included in a
list called "
noted that "revenue climbed 51% last year and is expected to rise more than 40% this year, with few competitors boasting its scope and quality of service. Analysts have roundly raised their estimates to catch up to Akamai's, and Cowen & Co., for one, flags it as an 'excellent large-cap play on the growth of multimedia Internet content.'"
Akamai is also a member of our
portfolio, in which we note:
Akamai is a perfect company to get acquired by Cisco (CSCO) - Get Report, particularly after the recent acquisition of WebEx, which provides IP-based video conferencing for the enterprise. When the Internet was just blossoming, it was simply enough to get your info from your computer out into the world beyond. And that is what Cisco was great at with its first major product, its routers. But now with the audience fully matured and demanding video (e.g., WebEx), the companies that speed up the last mile of transmission of Web content will become increasingly valuable. Akamai is the leader in this.
We would also point out that
was on this takeover-target list as well. Other members include
Brocade Communications Systems
So to recap Akamai, it has a board member recently buying shares, a strong quarter, confirmed full-year guidance, analysts who like the stock and talented investors all coming together for us. That's a solid foundation on which to take a harder look at the stock.
Next on the list is
. Deere also recently announced a stock buyback in which the company said it will buy back 20 million shares.
The Moline, Ill.-based company, which manufactures and distributes agricultural and commercial equipment worldwide, recently announced a solid improvement in first-quarter earnings. The company cited strong international demand for farm machinery, which it said offset weaker results in North America. Deere also increased its guidance for the full year, predicting a spike in farm equipment sales as a result of the growth of biofuels.
Robert Baird's Robert McCarthy maintained his neutral rating on the company, but he did raise his price target by $19 to $127. He pointed out that "improving agricultural sector fundamentals are translating into a more rapid-than-expected acceleration in demand for Deere equipment..."
Our own Jim Cramer has been a fan of Deere lately as well. He recently featured it as part of his
. Cramer said of Deere: "This stock is money in the bank." He considers it the best of breed in the farm-machinery business and said it is "quite well-priced."
It's also good to see that solid, highly regarded managers are also in the stock. We were glad to see that Ken Heebner's
(CGMFX) also owns the stock. This fund has a five-star rating from Morningstar and intends to invest in a smaller number of companies. Taking this focused approach has worked out: The fund has returned 16% annually for the last five years.
So with Deere, we have a buyback on top of a good quarter, increased guidance, raised price targets and two solid stock-pickers backing it. That's definitely a nice setup.
To see the rest of this week's picks, check out Stockpickr's
For more insight into Stockpickr's Guide to Insider Purchases and Stock Buybacks, you can review each of the last few weeks' picks by visiting these portfolios:
- Top 10 Insider Purchases and Buybacks I
- Top 10 Insider Purchases and Buybacks II
- Top 10 Insider Purchases and Buybacks III
- Top 10 Insider Purchases and Buybacks IV
- Top 10 Insider Purchases and Buybacks V
- Top 10 Insider Purchases and Buybacks VI
You can also review Cramer's
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 several quantitative-based hedge funds as well as a fund of hedge funds. He is also the author of
Trade Like a Hedge Fund
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;
to send him an email.
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