Top 10 Stocks With Big Insider Buying, Buybacks

Large repurchases make Dell and Western Union stocks to watch.
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Updated from 6:14 a.m. EST

At Stockpickr.com, we keep track of the

Top 10 Insider Purchases and Buybacks

each week. Here's the perfect setup in my mind: insiders buying the stock, the company buying back its own shares and a super investor like

Warren Buffett

also making a bullish bet on the stock.

If I can get three out of three, I'm in heaven. If I can get two out of three, or even one out of three, I'm still pretty happy about the situation, particularly if the stock is cheap in other ways as well.

Each Thursday we update the Stockpickr

Top 10 Insider Purchases and Buybacks

portfolio, featuring stocks that in recent days have had big insider purchases or newly announced buybacks, as well as super investors accumulating shares.

IBM

(IBM) - Get Report

makes this week's portfolio. Big Blue recently announced plans for an accelerated repurchase of up to $1 billion of its shares in addition to a $12.5 billion accelerated share repurchase announced in May. The shares are being repurchased from three banks through accelerated repurchase agreements by the end of February 2008.

The company has an aggressive plan to increase earnings per share to $11 by 2010 from $6.97 in the most recent fiscal year. This involves stock buybacks, gross margin expansion in its software division and tinkering with contributions to its pension program.

The stock is currently off of its $121 high this year, mostly due to weak third-quarter software sales. However, the fourth quarter has historically been strong, and the company's service revenues are still growing, as are sales to emerging markets and small businesses.

A recent

Barron's

article also noted that Bob Djurdjevic of Annex Research figures the shares are worth $125. He believes the financial services woes will last six to nine months. "Beyond that, sales will be on an upward spiral," he says.

It's also good to see that a firm like

Renaissance Technologies

is a believer in IBM's stock. The New York-based hedge fund's $5 billion Medallion Fund is considered one of the most successful hedge funds, yielding higher returns than such legendary investors as

Bruce Kovner

,

George Soros

and

Paul Tudor Jones

. A couple of its new positions include

Amazon.com

(AMZN) - Get Report

and

Bank of America

(BAC) - Get Report

.

We also like to see that

LSV Value Equity Fund

believes in IBM shares. This fund seeks long-term growth of capital and boasts a three-year return of 24%-plus.

So with IBM, we have a huge buyback as part of a three-prong plan to substantially increase earnings, a solid fourth-quarter outlook, analyst support with a nice target price and two well-known investors in the stock. It may be time to take a closer look at Big Blue.

Next on the list is

Dell

(DELL) - Get Report

. The computer giant recently announced a plan to repurchase $10 billion in common stock. The company noted that there was no set period for the buyback but that it has $15 billion in cash as well as strong quarterly cash flows to put toward the plan.

CEO Michael Dell added, "Dell is committed to a long-term share repurchase program as part of an overall capital allocation plan that supports growth and also returns value to shareholders."

In late November, Dell announced a 27% jump in third-quarter earnings sparked by growth in overseas markets like Brazil, solid demand for notebooks and falling prices for memory chips and other components. However, this fell just below analyst expectations, and the stock was subsequently hammered. Still, Dell outlined a long-term strategy to reignite growth, focusing on five key markets and products. "There's a lot of upside for us in the places that are growing the fastest," he said.

While Goldman took Dell off its conviction list (it just added the company a month ago), it did note, "although our thesis on Dell as a turnaround is intact, the timeline is not and the uncertainty is higher."

Michelle Warren, a senior research analyst with Info-Tech Research Group, added, "they've got this plan in place and it's a plan that will take them to a successful ending," Warren said. "It might be a new Dell to those who are outside looking in, but I think it still has the same pedigree that made them into the largest PC company a couple of years ago."

So both analysts still see the turnaround intact. In this environment, any misstep is likely going to get hammered. But with Michael Dell back at the helm and a strategy in place, I believe this company will turn around. The stock is also about 20% off its 30-day high.

We are glad to see the likes of

Wallace Weitz

as a believer in the company. Weitz is a mutual fund family based in Omaha, Neb. Often called the "other Oracle of Omaha," Weitz favors the value-disciplined approach of Ben Graham combined with "a conviction that qualitative factors that allow a company to have some control over its destiny can be more important than statistical measurements, such as historical book value or reported earnings." Other Weitz holdings include

Countrywide

(CFC)

.

It's also good to see that

Moore Capital

is betting on Dell. Since 1990, the fund has returned more than 24% annually, making Louis Bacon one of the top fund managers of his generation. Other top Moore positions include

Cisco

(CSCO) - Get Report

, another recent buyback play, and

Intel

(INTC) - Get Report

.

So with Dell, we have a buyback, a turnaround under way, a beaten-down stock and some very smart investors in the name. That makes Dell a stock worth considering.

And finally, we have

Western Union

(WU) - Get Report

rounding out this week's portfolio. The provider of money transfer and other financial services recently authorized $1 billion to repurchase shares, expanding an existing $300 million buyback plan.

Barron's

last week posted a bullish piece on the stock, noting that "given the company's efficient global money-transfer business and growth opportunities," the stock could be poised for a 20% jump or more. The report quoted Timothy Call, manager at Richmond, Va.-based Capital Management, who said, "The value of these shares will become evident as Western Union consistently grows earnings at 20% annually -- in the anticipated slow-growth environment."

Adding to the bullish case for Western Union is that

Maverick Capital

owns shares. This $10 billion hedge fund is run by Lee S. Ainslie III, a protégé of Julian Robertson at the legendary Tiger Management fund. Maverick also owns positions in

Union Pacific

(UNP) - Get Report

and

Qualcomm

(QCOM) - Get Report

.

We also like to see that highly respected investor

D.E. Shaw

is also a believer in Western Union. The global investment firm also owns shares of

Take-Two Interactive

(TTWO) - Get Report

and

USG

(USG)

.

So with Western Union, we have a large buyback, a solid outlook for 2008, a bullish piece from influential

Barron's

, and two outstanding funds in the stock. It could be time to take a harder look at this stock.

To see the rest of this week's picks, check out Stockpickr's

Top 10 Insider Purchases and Buybacks

portfolio.

You can also review

Barron's Top Insider Purchases

from the prior week as well as Cramer's

"Mad Money" Buybacks

.

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;

click here

to send him an email.

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