At Stockpickr.com, we keep track of the Top 10 Insider Purchases and Buybacks each week. One of the primary goals of Stockpickr.com is to allow everyday investors to see what the big guns are buying.
We often 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 then we also like to see that same company announce that an insider has purchased a large chunk of stock or, even better, that the board is planning a large buyback program.
Then we have a very nice place to start our own homework.
Each Thursday we update the Stockpickr
portfolio, featuring the 10 stocks of the week that had either big insider purchases or newly announced buybacks and also had super investors accumulating shares.
is in this week's portfolio. The Westport, Conn.-based construction and mining equipment maker increased its buyback program by $500 million to $700 million. The company said they will repurchase the shares on a time-to-time basis by June 30, 2009.
On top of the buyback, Terex insiders have been buying shares at unusually high volumes. As the share price has dropped over 37% from its 52-week high of $96.94, COO Thomas Riordan took advantage of the attractive valuation and purchased 20,157 shares, while director David Sachs bought 15,000 shares.
It's always a bullish sign when we see company leaders buying shares for their own accounts.
Terex's Chairman and CEO Ronald DeFeo said in a press release, "Terex Corporation's strong financial position and continued favorable business outlook enables us to expand our stock repurchase program. While we continue to seek opportunities to reinvest in our business, both through capital expenditures and acquisitions, we also see the value in investing in our own shares and the attractive return it represents." Mr. DeFeo added, "We remain committed to enhancing shareholder value and have confidence in the performance and future prospects of Terex."
Credit Suisse analyst Jamie Cook remains upbeat on TEX and reiterated an outperform rating on the stock. Cook believes investors' worries about the global economy and commercial markets are exaggerated.
With 65% of total sales coming from overseas, the projected flat U.S. market in 2008 should be stabilized by strong global growth. Cook rewarded the stock with an $80 price target, representing a 36% premium, and stated, "TEX remains most compelling on a risk/reward basis trading at 5.1 times 08 EV/EBITDA and a 31% discount to the group."
Another reason we like TEX is because John L. Keeley, Jr., President and Chief Investment Officer at
, owns the stock. Keeley Asset Management is an investment firm started in 1982 with $3.5 billion currently under management. Keeley is well known as a small-cap investor, but he also manages both a mid-cap and all-cap value fund.
The firm recently increased its positions in underwear maker
, a materials manufacturer.
It's also good to see that Ronald Muhlenkamp, who runs
, is a believer in Terex's stock. He has consistently outperformed the S&P 500 over the past decade, posting an average annual return of 16.2%, vs. the S&P 500 average annual return of 11% for the same period.
He is a classic value investor with a long-term buy-and-hold approach. He continues to like cyclically sensitive big stocks like
( MER) and
, and certain smaller companies like
and the homebuilders.
So we have a buyback, company insiders buying shares hand over fist, an upgrade and two well-known investors in the stock. It may be time to take a closer look at Terex.
Next on the list is
. The aerospace and defense contractor and the nation's sole builder of aircraft carriers announced a $2.5 billion buyback program, which represents over 9% of the company's total outstanding shares.
Since 2003, the company has authorized the repurchase of $6.7 billion in common stock, and it has bought back $4.2 billion, or 69 million shares, of it.
With only $713 million in cash, Northrop will be forced to finance the buyback, but this shouldn't be a problem. The company produced almost $1.8 billion in free cash flow over the past 12 months. Management gave no expiration date for the buyback and said shares will be bought on a time-to-time basis depending on market conditions.
Northrop's Chairman and CEO, Ronald D. Sugar, commented, "Our new $2.5 billion authorization is the largest in our company's history and demonstrates our continuing commitment to a balanced cash deployment strategy that encompasses investment for the future, management of liabilities, and the enhancement of shareholder value through share repurchases and dividends. It also underscores our confidence in Northrop Grumman's financial outlook for 2008 and beyond."
Northrop's record third-quarter earnings are another reason for shareholders to remain bullish. Net income rocketed 62%, while sales were up 7% at $7.9 billion. Operating margins increased 47% to $807 million, or 10.2% of sales, and EPS jumped 60% to $1.41. Cash from operations totaled a record $1 billion, and total backlog surged to another record of $64.1 billion.
A CIBC World Markets analyst also increased NOC's price target to $91 from $83. It said, "With ships appearing to be back on course and bookings shaping up nicely, the story is improving and remains the cheapest among peers at 14.9X our 2008 EPS estimate."
We also like to see that David Dreman, founder and Chairman of
, owns NOC. In an article in
, he sums up his superior investment strategy: "We invest in undervalued companies that exhibit strong fundamentals, above-market dividend yields and historic earnings growth, which our analysis indicates will persist." Mr. Dreman is also buying
It's also nice to see that the
sees upside in Northrop's stock.
This fund, which has a three-year return of 24% and a Morningstar rating of 5 stars, is run by Josef Lakonishok. It primarily invests in common stocks of large and medium U.S companies that are undervalued at the time of purchase and have potential for near-term appreciation. Lakonishok also likes
Once again, we have a buyback, record earnings, increased price targets and two well-known investors in the stock. It may be time to do some homework on Northrop.
And finally we have
in this week's portfolio. Chicago's electric utility company, which operates in the mid-Atlantic and Midwest, said it added $500 million to its buyback program, bringing the total repurchase amount to $1.75 billion. Based on the stocks current price of $83, the buyback would represent about 5.9 million shares.
Exelon expects free cash flow to be around $1.25 billion in 2008, and would use most of that to repurchase shares throughout the year. Exelon, who recently set the record for highest annual electricity production, also said it will fatten its quarterly dividend in an effort to return more cash to shareholders. Shareholders as of Feb. 15 will receive a 50-cent dividend on March 10, representing a 14% increase from the dividend issued in the fourth quarter.
"Our cash flow and balance sheet continue to be robust," said John W. Rowe, Exelon's Chairman, President and CEO. "Considering our financial strength and the improving fundamentals of our business, our board has reset the annual base dividend rate at $2.00 per share.
This increase will return more immediate value to our shareholders, while still providing the financial flexibility needed to make sound investments in our business and take advantage of opportunities as they arise."
Paul Ridzon from KeyBanc Capital Markets walked away from the Exelon analyst meeting on a positive note and believes the long-term thesis remains encouraging. "In our view, EXC represents a core long-term holding for utility investors.
With our view that even staunch climate change naysayers are rethinking their stance, carbon could become an increasingly visible topic, with EXC being recognized as a beneficiary," said Ridzon. He reiterated a buy rating and increased the price target to $91 from $86.50.
It's good to see that
likes Exelon. This $4.5 billion dollar investment fund was started by Stanley Druckenmiller in 1981. Druckenmiller went to work for his hero George Soros in 1988 and is famous for orchestrating Soros' billion-dollar raid on the British pound in 1992.
His timely long and short positions helped generate string of 30% returns for Soros' Quantum Fund. Duquesne recently opened positions in
Another bullish note for EXC is that it is part of the
. Morgan Stanley Utilities A is an open-end fund that invests at least 80% of its assets in common stock and other equity securities and investment grade fixed-income securities of companies that are engaged in the utilities industry in the USA.
It boasts a 1-year annual return of 24%. They also like
. So we have a buyback, a buy rating with an increased price target, and two well-known investors in the stock. It may be time to check out EXC.
To see the rest of this week's picks, check out Stockpickr's
- 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
- Top 10 Insider Purchases and Buybacks XXXI
- Top 10 Insider Purchases and Buybacks XXXII
- Top 10 Insider Purchases and Buybacks XXXIII
- Top 10 Insider Purchases and Buybacks XXXIV
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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