One of the primary goals behind Stockpickr.com is to allow everyday investors to see what the big guns are buying. Often times, we see a well-known investor loading up on a particular stock. This is usually a good sign because you know that person put a lot of time and due diligence into that investment process.
However, we also like to see that same company announce that an insider has purchased a large chunk of stock or, even better, the board initiate a new large stock-buyback program. From there, we have a very nice place to start our own homework.
That's why each Thursday at Stockpickr we update the
portfolio, featuring stocks that recently announced either big insider purchases or large share-buyback plans as well all while super investors are accumulating shares.
makes this week's list. The missile systems and jet manufacturer said it will add an additional 20 million shares to its existing buyback plan. During the third quarter, the Bethesda, Md., aerospace company repurchased more than 4 million shares and raised its dividend 20% to 42 cents a share.
Last week, Lockheed Martin reported a 22% jump in third-quarter profit. The company earned $766 million, or $1.80 a share, up from $629 million, or $1.46 a share, in the year-ago period, squashing analysts' expectations of $1.64 a share. Revenue came in at $11.1 billion, up 16% from $9.61 billion last year. Lockheed's aeronautics division saw a 31% jump in operating profit to $414 million.
Lockheed Martin surpassed Bear Stearns' expectations, and for that reason the firm gave Lockheed's stock an outperform rating and $115 price target.
Adding to the bullish case for Lockheed,
is a believer in the stock. The $5 billion Medallion Fund, which has averaged 35% annual returns since 1989, also owns shares of
Johnson & Johnson
Another noteworthy Lockheed bull,
, is a $500 million deep-value mutual fund that has returned 16% annually since it started in 1998. The fund likes tech companies with no debt and a lot of cash, but also owns energy company
and shipping company
Lockheed provides a substantial buyback and increased dividend, superior earnings, an outperform rating with an increased price target and two well-known investors in the stock. It may be time to take a closer look.
Next on this week's list is
Black & Decker
. The tool and hardware manufacturer last week added 4 million shares to its existing buyback plan. This year, the Towson, Md.-based company has already retuned 5.4 million shares to stockholders, and with the new addition, 4.9 million shares remain authorized for repurchase.
These large buybacks hint that Black & Decker's board believes the stock, down 17% since mid-July, is cheap.
Black & Decker shares have been flat recently, but a longer-term investor should find the stock attractive at current levels. The unknown magnitude and timing of the revival in the housing market creates a rewarding situation for BDK holders. And if the housing market recovers sooner rather then later, you're going to want to own Black & Decker shares.
It is also good to remember that Black & Decker is the largest power tool company in the world, controlling market share in the consumer and professional markets. The company boasts 11% earnings-per-share growth since 2000 and a solid balance sheet with plenty of free cash flow. Management's focus on outsourcing has reduced fixed assets by 4% since 2001, while revenue has increased 50%.
This well-oiled machine even caught the attention of
. Recently, the Oracle from Omaha reported filling his
Berkshire Hathaway B
portfolio with BDK shares.
Another notable investment firm that owns Black & Decker shares is
, a $26 billion "classic value investment fund" that looks to invest in deeply undervalued stocks. The firm recently invested in
, for instance. To assess the viability of each investment, the fund looks to see if the problems that plague a stock are temporary or permanent issues. With Black & Decker, the issues appear to be temporary.
also believes in Black & Decker. This fund is run by Josef Lakonishok, a William G. Karnes professor of finance at the University of Illinois with more than 25 years of investment research experience. His fund boasts a three-year return of more than 24%.
Black & Decker is a battered stock lately, with a buyback and plenty of well-known investors buying shares for their own funds. Despite the recent tough run, it may be time to take a closer look at Black & Decker.
And finally, we have pork and beef producer
. A couple weeks ago, CEO C. Larry Pope invested $293,060 to buy 10,000 shares for $29.30 to $29.31 apiece. When the chief of a company starts buying shares for his own pocket, investors should take notice.
The stock price has been on a rollercoaster ride lately, but overall it has fallen 16% in the past three months. Recently, however, directors have been showing faith by buying more shares as well. On top of Pope's recent purchase, another director, Paul J. Fribourg, who runs ContiGroup, last month increased his Smithfield stake to 6.3%, purchasing shares when they were trading nearly as low as they are now. Now Fribourg is at it again. On Oct. 16, he said ContiGroup will buy up to 1.5 million shares of Smithfield over the next year.
So what's with all these insider purchases? The directors are telling us Smithfield shares are too cheap, and significant catalysts are ahead. Take, for example, Smithfield's deal to supply China with 61 million pounds of pork. It doesn't seem that significant, considering China consumes 100 billion pounds of pork a year, but imagine what deals might lie ahead. The market share available to Smithfield is enormous and could substantially expand the company. Equity research firm SunTrust Robinson Humphrey also finds Smithfield shares attractive here and stamped the stock with a buy rating and $35 target price.
We like to see a solid fund like
in Smithfield. its other holdings include
It's also good to see that Smithfield is owned by the legendary
columnist who also runs the $30 billion Fisher Asset Management.
So with Smithfield we have major insider purchases, potentially huge deals with China looming in the future, a buy rating and two noteworthy investors. It may be time to do more homework on this stock.
To see the rest of this week's picks, check out Stockpickr's
- 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
- Top 10 Insider Purchases and Buybacks XXII
- Top 10 Insider Purchases and Buybacks XXIII
- Top 10 Insider Purchases and Buybacks XXIV
- Top 10 Insider Purchases and Buybacks XXV
- Top 10 Insider Purchases and Buybacks XXVI
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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