Top 10 Stocks With Big Insider Buying, Buybacks
Part of the philosophy behind Stockpickr.com is to follow in the footsteps of smart people. As I've said before, this could mean a few different things. It could mean piggybacking great investors like Warren Buffett or Carl Icahn. Or it could mean buying what the CEOs, employees and directors of a company -- the insiders -- are buying. These are people who know the intimate details of their company far better than you or me.
The perfect setup, however, comes when one or more of these company insiders -- or an entire board in the case of a company-stock buyback -- are buying shares at the same time that savvy, proven investors are also building positions.
Each Thursday at Stockpickr, we update the
Top 10 Insider Purchases and Buybacks
portfolio, featuring stocks that have seen either big insider purchases or newly announced buybacks, as well as super investors accumulating shares.
Tyco International
(TYC)
makes this week's list. The diversified manufacturer said it will repurchase up to $1 billion of its common stock. That represents about 23.4 million shares, or roughly 4.7% of the $19 billion industrial giant's total outstanding shares.
On top of the repurchase, the board also increased the company's quarterly dividend to 15 cents a share. The enlarged dividend, which is now among the highest of its competitors, represents a 36% increase from the company's previous dividend of 11 cents a share.
The stock was subsequently upgraded by several institutions, including Deutsche Bank's Nigel Coe, who cited Tyco's defensive and diverse revenue portfolio. He said that in an uncertain macro environment, Tyco offers many desirable traits, including sizable 20% EPS growth projected for the end of 2007 and into 2008, as well as attractive valuation. "Given this attractive mix of quality and value, and with a projected total return of 20%, we upgrade the stock to buy," Coe said.
It's also good to see that someone like
is a believer in Tyco's stock. When the greatest investor alive believes in a stock, we take notice. His other newer positions include 8.7 million shares in
Bank of America
(BAC) - Get Bank of America Corporation Report
and an increasing stake in railroad company
TheStreet Recommends
Burlington Northern
( BNI). Another notable Tyco shareholder is
, a former Goldman Sachs executive and founder of Omega Advisors.
So with Tyco, we have a buyback, an increased dividend, an analyst upgrade and two well-known investors in the stock. It may be time to take a closer look.
Next on the list is industrial conglomerate
United Technologies
(UTX) - Get n.a. Report
, which said Tuesday it would raise its buyback to $2 billion from $1.5 billion and reaffirm its earnings expectations for the year.
The company, which owns helicopter maker Sikorsky and elevator manufacturer Otis, is in the midst of a significant cost-reduction campaign that could send its operating-income margin to a remarkable 18% from its current level of 14%. "You look around our company, there is cost reduction every way we go," CEO George David said at a conference last week.
David said that operating efficiency and pricing strategy have caused operating margins to soar from 5% in 1994 to 14% today. Now China's building boom has increased that nation's demand for United Tech's elevators and air conditioning systems.
After United Tech announced the buyback, Bernstein Research upgraded the stock to outperform and raised its price target to $91 from $83. The upgrade is based on a more positive long-term outlook at the company's heating and air-conditioning division, Carrier, and helicopter manufacturer Sikorsky.
Currency trends also are likely to add revenue by 2009, with the euro reaching all-time highs against the dollar and the Chinese renminbi becoming more important, said Bernstein. The firm also cited management's focus on improving margins.
Another positive note for UTX is that
, the founder and investment chief of Dreman Value Management, owns the stock along with other positions like
Altria
(MO) - Get Altria Group Inc. Report
.
It's also good to see that a successful investor such as
owns United Tech shares. Ken Fisher, son of famous value investor and Buffett inspiration Phil Fisher, is an investing legend now in his own right. He runs the $30 billion Fisher Asset Management, and CXOAdvisory.com ranks him as the No. 1 market pundit out there and has tracked all his market-timing calls.
So with United Technologies, we have a buyback, an analyst upgrade including increased price target, and two well-known investors in the stock.
Finally, we have
ImClone Systems
(IMCL)
making the list. This biotech's CEO, John Johnson, recently purchased 13,609 shares -- worth a half-million dollars. Just days later, the stock rocketed 18% following positive news about ImClone's cancer drug Erbitux.
According to a
Reuters
report, Johnson says it was just "pure confidence." Indeed, after Johnson took the job at ImClone on Aug. 27, he agreed to buy $500,000 worth of company stock within 90 days of joining the company. The 13,609 shares he bought for an average price of $36.74 rose $6.97 each within three days.
Another positive note for ImClone is that analysts at Rodman & Renshaw reiterated a market-outperform rating on the company. They believe positive trial results for its drug Erbitux will prove that it is effective against lung cancer. Rodman & Renshaw raised their target price to $55 based on ImClone's positive trial results, three-year EPS growth of 22% and forward price-toearnings ratio of 23.
It was also good to see that super investor
believes in the company. Another notable investment firm that owns ImClone's shares is
Legg Mason Partners Aggressive Growth A
, which has a Morningstar rating of four stars and is run by Richard Freeman.
So with ImClone, we have a CEO buying stock, an upgrade including increased price targets, and two well-known investors in the stock. That's definitely a nice setup.
To see the rest of this week's picks, check out Stockpickr's
Top 10 Insider Purchases and Buybacks
portfolio.
And to take a closer look at Stockpickr's Guide to Insider Purchases and Stock Buybacks, you can review the last few weeks' picks by checking out these portfolios:
- Top 10 Insider Purchases and Buybacks XII,
- Top 10 Insider Purchases and Buybacks XIII,
- Top 10 Insider Purchases and Buybacks XIV,
- Top 10 Insider Purchases and Buybacks XV,
- Top 10 Insider Purchases and Buybacks XVI
- Top 10 Insider Purchases and Buybacks XVII
- Top 10 Insider Purchases and Buybacks XVIII
- Top 10 Insider Purchases and Buybacks XVIX
- Top 10 Insider Purchases and Buybacks XX
- Top 10 Insider Purchases and Buybacks XXI.
You can also review
Barron's Top Insider Purchases
from the prior week as well as Cramer's
.
At the time of publication, Altucher and/or his fund had no positions in stocks mentioned, although positions may change at any time.
James Altucher is president of Stockpickr LLC, a wholly owned subsidiary of TheStreet.com and part of its network of Web properties, and a managing partner at Formula Capital, an alternative asset management firm that runs a fund of hedge funds. He is also a weekly columnist for
The Financial Times
and the author of
Trade Like a Hedge Fund
,
Trade Like Warren Buffett
and
SuperCa$h
. 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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