The perfect setup for a stock in my mind? Insiders buying shares, the company buying back stock and a super-investor like Warren Buffett also accumulating a position. If I can get three out of three, I'm in heaven, but even two out of three makes me happy, particularly if the stock is cheap in other ways as well.
This is why each Thursday at Stockpickr we update the
portfolio, featuring stocks that have seen either big insider purchases or newly announced buybacks, as well as super investors accumulating shares.
makes this week's list. The Chicago-based electric utility company announced last Tuesday it would buy back up to $1.25 billion of its outstanding common stock. The company expects to repurchase the shares within the next six months.
Exelon recently reported excellent second-quarter earnings, boasting a 9% jump in profit margins. Net income increased to $702 million, or $1.03 a share, from $644 million, or 95 cents a share, in the same quarter last year. Revenue rose to $4.5 billion from $3.7 billion, shattering the Street's expectations for $4.16 billion. The company credited the impressive results to a higher margin in energy sales and favorable weather conditions.
The power company also revised its 2007 earnings forecast. Exelon now anticipates earnings in the range of $4.15 to $4.30 a share, from the previous estimate of $4.00 to $4.30.
On top of the buyback program, Deutsche Bank reiterated its buy rating and $91 price target for the stock. The firm believes Exelon's $1.25 billion buyback, though in line with its $1.3 billion model, surpassed market expectations.
Another positive note is that the governor of Illinois finally signed the $1 billion relief package for Exelon and other generators in the state. The event should allow Exelon to move ahead with its nuclear fleet. Deutsche Bank states, "We believe that the recent pullback presents a compelling buying opportunity in a high-quality, critical portfolio of nuclear generation assets at an attractive valuation close to 7.0 times adjusted EBITDA."
Adding to the bullish case for Exelon is that a fund like
is a believer in the stock. Besides Atticus, a New York investment management firm with $13 billion under management, Exelon shares are also owned by
, a $12 billion group of hedge funds founded by Steven Cohen in 1992.
While SAC closely guards its returns, published reports and people who have seen the fund's letters to its investors say that SAC had a gross return, before its fees, of at least 40% in every year since inception, making it astoundingly successful. SAC's other main holdings include
So with Exelon, we have a big buyback, solid earnings growth, top-of-the-line analyst support and two well-known investors in the stock. It may be time to take a closer look at the stock.
Next on the list is job-search Web site operator
, which in an effort to return more capital to shareholders said last Tuesday it will buy back an additional $250 million in common stock. The new plan comes right on the heels of an $100 million repurchase plan that has just been exhausted.
The first thing you may notice in looking at Monster is that the share price has fallen nearly 40% from its 52-week high of $54.79. However, John Janedis at Wachovia upgraded the stock to outperform from market perform, saying the share price reflects a recession scenario.
Janedis points out that growth in the international and enterprise sector remains strong. Europe and Asia are still thriving while overall job listings growth remains stable. The problems in North America aren't as bad as they seem and are mainly confined to the e-commerce area. Janedis said a sale of the company is possible, although not likely since he believes the company is focused on near-term restructuring, as made apparent by the new buyback plan.
ThinkEquity Partners is another firm that recently upgraded Monster to buy from hold. It also finds the company's global market position attractive, explaining that while the weakening U.S. labor markets could present headwinds for North American growth, Monster is competitively positioned to remain strong.
Another positive for Monster is that the Blackstone Group's hedge fund,
, owns the stock. Some of its other positions are
It's also good to see the likes of Kenneth Smith, from the
(MNNAX), in the stock. Smith runs the fund with a focus on long-term capital appreciation, investing at least 80% of its assets in Internet growth plays. The fund also owns
So with Monster Worldwide we have an increased buyback, two strong upgrades and noteworthy investors buying shares. That's a solid case for the stock.
And finally, we have
making this week's list. One of Wachovia's directors, Lanty Smith, recently bought 50,000 shares of the company's stock for $2.4 million, bringing his total stake to 83,000 shares.
The Charlotte, N.C.-based bank is actually benefiting from the tumult in the mortgage industry. While many mortgage companies are making cuts, Wachovia has been beefing up its mortgage business, last year acquiring Golden West Financial. Mortgage loans in the first two months of the company's third quarter have spiked $1.2 billion, according to CEO Kennedy Thompson.
If mortgage risk isn't a worry for Wachovia, it makes sense that directors are buying shares hand over fist. They know the most about the company and they see a perfect buying opportunity.
With better-than-expected numbers, the stock was recently upgraded by Bernstein Research to outperform. The firm believes investor concerns around Wachovia's mortgage credit exposure are exaggerated. Bernstein notes the very different business models of
and Golden West -- countrywide's originate-and-sell approach is far more risky than Golden West's conservative underwriting, where collateral protection is taken into consideration.
This is all positive news for Wachovia and well-known value investor David Dreman's
, which owns the stock. Another believer in Wachovia is
, a $100 billion-plus investment fund founded in San Francisco in 1930 with a long-term focus and rigorous price discipline. The firm's Stock Fund has posted an annual average return of 14.56% over the past 10 years and 14.9% over the past 20 years.
So with Wachovia we have a company director purchasing shares, amazing success amid a dismal mortgage market, and two renowned funds in the stock. That makes Wachovia's stock worth a look.
To see the rest of this week's picks, check out Stockpickr's
And to take a closer look at Stockpickr's Guide to Insider Purchases and Stock Buybacks, you can review the last few weeks' picks by checking out these portfolios:
- Top 10 Insider Purchases and Buybacks XI,
- Top 10 Insider Purchases and Buybacks XII,
- Top 10 Insider Purchases and Buybacks XIII,
- Top 10 Insider Purchases and Buybacks XIV,
- Top 10 Insider Purchases and Buybacks XV,
- Top 10 Insider Purchases and Buybacks XVI
- Top 10 Insider Purchases and Buybacks XVII
- Top 10 Insider Purchases and Buybacks XVIII
- Top 10 Insider Purchases and Buybacks XVIX
- Top 10 Insider Purchases and Buybacks XX.
You can also review
from the prior week as well as 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 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
. 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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