Updated from 6:12 a.m. EST
Part of the philosophy of Stockpickr is to follow in the footsteps of smart people. This could mean a few different things.
First, it could mean piggybacking great investors like Warren Buffett or George Soros. Other times it means buying what the CEOs, employees and directors of a company are buying. These are people who know the intimate details of their companies far better than you or me.
The perfect setup is when one of these company insiders or an entire board (in the case of a stock buyback) are buying shares at the same time as some smart, savvy investors.
Each Thursday, we update the Stockpickr
portfolio, featuring the stocks of the week that had either big insider purchases or newly announced buybacks as well as "smart money" accumulating shares.
makes this week's portfolio. On Jan. 24, the Louisville-based fast food chain operator said it will buy back $1.25 billion in common stock over the next 12 months.
The company, which operates familiar fast food joints like KFC, Pizza Hut, Taco Bell and Long John Silver's, on Monday reported fourth-quarter results and raised guidance. Fueled by record new-unit growth in mainland China, Yum! experienced worldwide same-store-sales growth of 3% and operating profit growth of 8%. A 30% jump in operating profit from China and an 18% jump at its international unit offset a 3% decline in the U.S. A low tax rate and positive currency conversions also added to Yum!'s profits.
Yum! saw fourth-quarter earnings per share grow 5% to 44 cents, beating the consensus of 42 cents. Its revenue soared 8.2% to $3.26 billion. The quarter was highlighted by 42% jump in sales from China and a 16% jump in its international unit. The China division also reported outstanding profit growth of 44%. Same-store-sales grew 17% in China, 5% internationally and 1% in the U.S. The company raised full-year 2008 EPS forecasts from $1.82 to $1.85, assuring at least 10% growth.
Yum! started the year with a maintained buy rating from S&P and a price target of $45. The analysts raised their 2008 EPS estimates by 5 cents to $1.95 on the belief that the dollar will continue to decline vs. the yuan. They also note that certain food safety issues that affected 2007 results will no longer be a problem in 2008.
We also like to see that
owns Yum! stock. Hawkins, who manages Southeastern Asset Management, has more than $31 billion in client and investment company assets. His fund also owns names such as
This is all positive news for Yum! Brands, but what is even more interesting is that Yum! shares are also found in the
, which tracks the Share BuyBack Achievers Index. To become eligible for inclusion in the index, a company must be incorporated in the U.S., trade on a U.S. exchange and must have repurchased at least 5% or more of its outstanding shares for the trailing 12 months. The fund also holds
So with Yum! Brands, we have a buyback, solid earnings, a buy rating and two well-known investors in the stock. It may be time to take a closer look.
Next on the list is
. The toy manufacturer, known for its Barbie, Hot Wheels and Fisher-Price brand names, last week added $500 million to its share-buyback plan. The El Segundo, Calif.-based company initiated its ongoing repurchase plan in February 2003, and since then Mattel has repurchased 104 million shares totaling $2 billion.
Mattel last Thursday posted positive fourth-quarter and annual financial results. For the quarter, the company reported net income of $328 million, or 89 cents a share, including a 13-cent tax-related gain per share. Even stripping out that one-time benefit, Mattel beat analyst expectations for a 73-cent profit per share, according to Thomson Financial data. The year's 18% growth in international gross sales picked up the slack for weak domestic sales, which were down 3%.
Wedbush Morgan analysts this week said they maintained a buy rating on Mattel and increased their target price to $24 from $20. They note they were pleased to see Mattel's fourth-quarter numbers ahead of estimates with global net sales growing 3.8% to $2.19 billion. Wedbush Morgan raised its 2008 EPS estimates to $1.65 from $1.53 and 2009's EPS estimates to $1.77 from $1.62.
It's also good to see that
is into Mattel's stock. The highly secretive, New York-based hedge fund also holds
Johnson & Johnson
Another positive for Mattel is that
is bullish on the stock. The five-star Morningstar-rated fund also holds
So with Mattel, we have a buyback, great earnings, a Wall Street buy rating with increased price targets and two well-known investors in the stock. That's a solid foundation for this stock to take off.
And finally, we have
making this week's list. The online movie rental company said it will buy back up to $100 million in common stock through the end of the year.
On top of the buyback, Netflix just reported fourth-fourth quarter earnings that shot past analysts' predictions. In the fourth quarter, the Los Gatos, Calif., company made a profit of $15.8 million, or 24 cents a share, beating last year's mark of $14.9 million or 21 cents a share. Analysts from Thomson Financial were looking for 14 cents a share. Revenue climbed to $302.4 million, up 9% from $277.2 million in the year earlier period.
Netflix added 451,000 subscribers in the quarter and closed out the year with 7.48 million. This is more than double the subscriber base for the company's closest competitor,
, which had 3.1 million subscribers in September. As Blockbuster struggles with pricing issues and delivery and pick-up problems, their online business seems to be slowing while Netflix gains more market share.
Even with Blockbuster under control, Netflix faces yet another challenge --
. Apple is trying to expand its online business by providing people with the ability to download movie rentals. The bonus with this is that you don't have to wait for your movie to be delivered in the mail. Apple's market share in this area is weak and little is known whether Apple is dipping into Netflix's market share, but it still makes investors nervous. On the other hand, Netflix is counterattacking by giving most customers unlimited access to streaming movies and TV shows.
Goldman Sachs Asset Management is still a believer in Netflix and raised its stake in the company to 5.4% from 3.1%. Goldman now owns 3.56 million shares, making it the fourth largest institutional owner of Netflix.
One of the few investors who own more Netflix shares than Goldman is
. As portfolio manager of Legg Mason Value Trust, Miller has been the only mutual fund manager who has beaten the
for the last 14 straight years (although that streak just ended in 2006). Miller is also bullish on
So with Netflix we have a buyback, solid earnings, and some noteworthy investors buying up shares.
For more stocks and analysis, check out this week's
For the last 10 most recent portfolios, check out:
- 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
- Top 10 Insider Purchases and Buybacks XXXV
- Top 10 Insider Purchases and Buybacks XXXVI
- Top 10 Insider Purchases and Buybacks XXXVII
- Top 10 Insider Purchases and Buybacks XXXVIII
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
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
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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