One of the primary goals of Stockpickr.com is to allow everyday investors a look at what the big guns are buying. Often, we see a big-name 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 process.
But when that same company announces that an insider has purchased a large chunk of stock or, even better, the board announces a new large share-buyback program, that usually seals the bullish case for the stock.
As Jim Cramer often points out, insider selling happens all the time for many different reasons, but insiders buy for only one reason: They think their stock is going higher.
That's why, each Thursday at Stockpickr we update the
portfolio, featuring stocks that have had either big insider purchases or newly announced buybacks as well as super investors accumulating shares.
makes this week's list due to a new $10 billion buyback plan. The new repurchase plan, which represents more than 20% of total outstanding shares, is expected to be completed within the next three years, with half or more to be done by year-end 2008.
The Minneapolis-based discount retailer also, however, surprised investors by reporting a 4.4% drop in third-quarter earnings. Management chalked up the disappointing results to soft sales in the company's higher-margin products like home goods and clothing, which were affected by the weak housing market and unusually warm weather. On a positive note, revenue in the quarter jumped 9.3% to $14.8 billion while same-store sales, one of the industry's most powerful metrics, increased 3.7%.
Deutsche Bank remains a believer in Target and maintains a buy rating with a $79 price target. Currently trading at 13.1 times next year's earnings, Target is undervalued compared to its historic full-year average of 18.8 times earnings. Deutsche Bank analyst Shane Higgins said, "Specific catalysts (share buyback program, direct sourcing and potential sale of its credit business) should allow the shares to appreciate to our $79 price target, which assumes a 20.1x multiple on our new FY08 estimate."
We also like to see that Bill Ackman from
owns Target shares. Ackman's firm accumulated control of 9.6% of the stock -- nearly 10% of a $60 billion company. The firm owns options to purchase 79 million shares with strike prices ranging from $34.63 to $53.12, exercisable through dates ranging from Dec. 14, 2007, to April 6, 2009. Ackman's hedge fund has returned more than 40% over the past two years. His firm also owns
Barnes & Noble
is another notable investment firm that sees upside in Target. The firm manages its trademark $14 billion Sequoia Fund, which has one of the best long-term performances on Wall Street. Since 1970, the average total return has been 15.7%.
is another one of its major holdings.
So with Target, we have a buyback, a buy rating and two well-known investors in the stock. It may be time to take a closer look at Target.
Next on the list is router and switch maker
, which just approved an additional $10 billion share-repurchase plan to bring the total stock-buyback program to $62 billion.
Since September 2001, the San Jose, Calif., company has bought back 2.3 billion shares for a total cost of $46.2 billion, reducing its outstanding shares from 7.3 billion in 2001 to 6.1 billion at the end of October 2007. The share reduction would have been greater had it not been for 1.15 billion shares added to the market through exercising employee stock options.
Earlier this month, the Internet networking supplier said its quarterly profit rocketed 37%. For the first quarter ended Oct. 27, Cisco reported net income of $2.2 billion, or 35 cents a share, on revenue of $9.6 billion, vs. net income of $1.6 billion, or 26 cents a share, on revenue of $8.2 billion for the same quarter last year.
It is also great to see that Kintisheff Research reiterated a buy rating and increased its price target on Cisco from $39 to $40. Based on better-than-expected early growth coming from the services business of Cisco, Kintisheff boosted its full-year 2008 forecasts.
Another bullish sign for Cisco is that David Dreman of
recently bought the stock. With a focus on investing in undervalued companies that exhibit significant growth, Dreman has returned 17% annually on the firm's Large Cap Value Fund and 16.5% annually on the Small-Cap Value Fund since the firm's inception in 1991. Among the firm's other new stock picks is poultry producer
We also like that
is betting on Cisco. Moore Capital is a group of hedge funds, run by Louis Bacon, that has more than $10 billion in assets. Since 1990 the fund has returned more than 24% annually, making Bacon one of the top fund managers of his generation. He is also buying shares of
So with Cisco we have a buyback, solid earnings, a buy rating including boosted price targets, and two exceptional investors in the stock. That makes Cisco a stock worth considering.
And finally, we have
American International Group
making this week's list. The world's largest insurer by market capitalization said it will add $8 billion to its buyback plan.
During the third quarter of 2007, AIG repurchased 30.6 million shares of its common stock and an additional 14 million shares through Nov. 5, for a total of 69 million shares purchased so far this year, a sign the New York-based company still believes its shares are undervalued.
AIG reported poor third-quarter earnings with net income coming in at $3.1 billion or $1.19 a share, compared to $4.2 billion, or $1.61 a share, in the same quarter last year.
Although AIG has been under recent selling pressure, Todd Bault from Bernstein Research believes this scenario creates a buying opportunity. He explains, "This is looking like a typical credit cycle market overreaction, and it is producing excellent longer-term opportunities for fundamental-oriented investors. AIG appears deeply oversold, trading at 55% of the S&P. With 60% upside to our target price ($85), AIG is becoming a very high priority stock for investors to consider." He rates it outperform.
Another positive for AIG is that legendary value investor Michael Price, from
, owns the stock. Currently managing $1.6 billion, Price learned his trading practices from Max Heine and quickly gained a reputation for shaking up management. He also owns shares of
It's also good to see that someone like Bruce Kovner of
is a believer in AIG's stock. Over the past 10 years, the $20 billion, New York-based trading and investment firm has purportedly returned more than 28% annually, including a 31% return in bear-market year 2001. His most recent buys are
So with AIG, we have a buyback, an outperform rating with an inflated price target, and two notable investors into the stock. It may be time to take a closer look at AIG.
To see the rest of this week's picks, check out Stockpickr's
- 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
- Top 10 Insider Purchases and Buybacks XXVII
- Top 10 Insider Purchases and Buybacks XXVIII
- Top 10 Insider Purchases and Buybacks XXIX
- Top 10 Insider Purchases and Buybacks XXX
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;
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