Part of the philosophy behind Stockpickr.com is to allow regular investors to follow in the footsteps of other smart investors.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 company far better than you or I do. The perfect setup is when one of these company insiders or an entire board (in the case of a buyback) are buying shares along with savvy, accomplished investors. That's why each Thursday at Stockpickr we update the Top 10 Insider Purchases and Buybacks portfolio, which features stocks that in the last week have experienced either big insider purchases or newly announced buybacks as well as super investors accumulating shares. Yum! Brands ( YUM) makes this week's list. The fast-food chain operator said it plans to repurchase $1.25 billion in common stock over the next 12 months. The new buyback is a step toward the company's goal to repurchase $4 billion over the next two years, potentially lowering the number of outstanding shares by as much as 20%. Only a mere $25 million remains under the $500 million buyback plan the company put forth in March, adding to the 12% reduction in outstanding shares it has achieved during the past three years.
On top of the massive buyback, the KFC, Taco Bell and Pizza Hut operator said third-quarter profit jumped 17% to 50 cents a share, or $270 million. The results smashed forecasts of 45 cents. Revenue also rose 13% to $2.56 billion, and worldwide operating profit growth soared 16%. The robust earnings were fueled by strong growth in its international division highlighted by China's 11% same-store sales growth and a 43% surge in revenue. Yum!'s international success prompted the company to increase full-year EPS growth forecasts to 13% from 12%, or $1.65 a share. It's also good to see that the legendary investor George Soros is a believer in Yum!'s stock. He owns the stock along with such other recent positions as Lehman Brothers ( LEH) and ConocoPhillips ( COP). Yum! is also owned by Mason Hawkins, a well-regarded investor who manages Southeastern Asset Management and its $31 billion in client and investment company assets. Aside from Yum!, his fund also counts DirecTV ( DTV) among its holdings. So with Yum! we have a massive buyback program, a huge jump in quarterly earnings and two well-known investors in the stock. It may be time to take a closer look at Yum!. Next on the list is Alcoa ( AA). The Pittsburgh-based aluminum giant gave the OK to buy back 217 million shares worth $8.6 billion, representing 25% of the company's total outstanding shares. The new repurchase plan is more than double its previous one. By the end of the third quarter this year, Alcoa bought back 43 million shares, or about 5% of total outstanding shares. Strong cash flows and proceeds from the sale of its 7% stake in Aluminum Corp. of China for $2 billion will help finance the buyback.
Alcoa recently announced a 3% jump in third-quarter profit, mostly due to the aforementioned sale. Alcoa posted earnings of 63 cents a share, or $555 million, up from 61 cents a share, or $537 million, in the same period last year. However, a 3% slump in revenue forced the company to miss estimates. Analysts at ValuEngine issued a strong buy recommendation for Alcoa and awarded the stock with a five-rating, the highest possible rating only handed out to 2% of the 4,000 stocks the firm covers. "The company exhibits attractive company size, P/E ratio and momentum," said ValuEngine. It bumped its one-year price target to $43.17. Another positive for Alcoa is that renowned investor Carl Icahn recently increased his position in the stock. The activist investor also recently beefed up his stake in BEA Systems ( BEAS) to 13.2% before it was offered a nice premium bid from Oracle ( ORCL). We also like to see a noteworthy fund like Caxton Associates investing in Alcoa. The $20 billion firm was formed as the successor to Caxton Corp., which was founded in 1983 by legendary billionaire macro trader Bruce Kovner. So with Alcoa we have a buyback, a strong buy rating with an increased price target, as well as two well-known investors in the stock. That's not a bad setup.
And finally, we have Avon ( AVP) making this week's list. The beauty products manufacturer said it will repurchase $2 billion in common stock over the next five years following the completion of its current program. Under its existing program, which began in late 2005, the company has bought back 26 million shares worth $904 million. We also like to see that BMO Capital Markets has raised its third-quarter earnings estimates and maintained an outperform rating on the stock. Avon will release earnings on Oct. 30. We were also pleased to see that Avon stock is owned by Dodge & Cox, one of the most established investment firms out there. The $100 billion-plus investment fund follows a long-term focus and employs a rigorous price discipline. Its Stock Fund has posted an annual average return of 14.4% over the past 10 years and 14.9% over the past 20 years. It's also good to see that a unique and successful fund like Fidelity Select Consumer Staples is a believer in Avon. The fund, which has returned over 21% in the past year, also owns CVS ( CVS) and Coca-Cola ( KO). So with Avon, we have an increased buyback program, an outperform rating and two well-known investors in the stock. It may be time to take a closer look at this name. To see the rest of this week's picks, check out Stockpickr's Top 10 Insider Purchases and Buybacks portfolio.
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