Top 10 Stocks With Big Insider Buying, Buybacks

Updated from 6:11 a.m. EST

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 Top 10 Insider Purchases and Buybacks portfolio, featuring stocks that have had big insider purchases or newly announced buybacks as well as super investors accumulating shares.

Kroger ( KR) makes this week's portfolio. The Cincinnati-based supermarket announced a new $1 billion stock-repurchase plan. It will replace the $1 billion plan the company set in place last June, a plan that has just $6 million in buying power remaining.

Kroger has repurchased $4.8 billion in stock and spent $290 million on dividends since January 2000. During that time, Kroger also has also reduced total debt by $1.5 billion.

The company isn't the only one buying shares. Company leaders are also investing in Kroger stock for their own accounts. In December, company director Robert Beyer spent about $1 million to buy 40,000 shares at an average price of $26.79 each.

Also last month, Credit Suisse upgraded the stock to outperform, citing the stock's 8% selloff since the grocery chain reported third-quarter earnings in November as unwarranted. Analyst Edward Kelly believes the disappointment was mostly driven by a drop in fuel earnings. But seeing as fuel earnings are extremely volatile from quarter to quarter, they make a terrible indicator of Kroger's overall business.

Kelly believes the long-term outlook still remains strong. In volatile markets where recession fears are looming, a defensive stock like Kroger becomes even more attractive. Historically, the food retail sector outperforms in a recession. Kelly set a price target of $32, representing upside potential of more than 20%.

Adding to the bullish case for Kroger is that Citadel Investment Group owns the stock. The $20 billion Chicago-based hedge fund is known for its large daily trading volume, which amounts to 1% to 2% of daily trading activity in New York and Tokyo. It also holds PepsiCo ( PEP) and Gemstar-TV Guide ( GMST).

Another positive for Kroger is that the Vanguard Global Equity fund also owns the stock. This five-star Morningstar-rated fund also owns shares of Research In Motion ( RIMM) and Marathon Oil ( MRO).

So with Kroger, we have a buyback, an upgrade including increased price targets, and two top-of-the-line investors in the stock. It may be time to take a closer look.

Next up is DirecTV Group ( DTV), which just approved a $1 billion stock-repurchase plan.

The provider of digital television recently completed a $1 billion program that was initiated back in August. Aggressive buybacks have been a common theme for the El Segundo, Calif.-based company, which has repurchased about $5 billion in stock since February 2006.

Even though there are fears of a weakening economy and credit crisis on our hands, CEO Chase Carey is confident his company can make it through unscathed. Carey believes that since the company's customers are in the higher income brackets, the impact of a poor economic environment would be "marginal at most."

Another bullish factor is that DirecTV's stock has been experiencing numerous Wall Street upgrades. Kaufman Bros. upgraded the stock to buy from hold and awarded it a $28 price target. Analyst Todd Mitchell believes DirecTV has the strongest HD offering in the marketplace and stands to benefit the most from the upcoming HDTV conversions. He also points out that a high percentage of the company's clients are in "A" and "B" household, and therefore have the least exposure to an economic downturn.

Lehman Brothers analyst Vijay Jayant also believes in DTV and upgraded the stock to overweight from equal weight, increasing the stock's price target to $32 from $30. He named DTV his top fundamental pick in the sector and predicts the same catalysts as Mitchell. He notes that DTV has the best HDTV offerings and that its subscriber base "represents the higher-end of the socioeconomic spectrum."

It's also good to see that Mason Hawkins, manager of Southeastern Asset Management, is interested in DirecTV stock. Hawkins recently increased his positions in Level 3 Communications ( LVLT) and Chesapeake Energy ( CHK).

Another positive for DirecTV is that Navellier & Associates owns the stock. The $4.5 billion fund, run by Louis Navellier, also holds Nvidia ( NVDA) and CME Group ( CME).

So with DirecTV, we have an aggressive buyback, analyst upgrades and two well-known investors in the stock.

And finally we have Xerox ( XRX) making this week's portfolio. The office equipment maker added $1 billion to its current buyback plan, which has $370 million remaining.

Since launching its buyback program in October 2005, the Stamford, Conn., company has repurchased 137 million shares, representing 13% of outstanding shares.

In the fourth quarter, reported last week, Xerox's profit skyrocketed 79% on a combination of cost control and growth in equipment business. Revenue rose to $4.88 billion from $4.38 billion. However, the company's outlook for the current quarter came in below expectations.

Crossroad Research wrote a bullish report on Xerox and reiterated a buy rating. They believe "Xerox' strong product portfolio growing installed base (and page volume) and strong cash flow provides upside opportunity for earnings."

We also like to see that one of the largest hedge funds in the game, Dodge & Cox, is into Xerox stock. The $100 billion fund recently increased its positions in Motorola ( MOT) and GlaxoSmithKline ( GSK).

LSV Asset Management is another noteworthy fund that likes Xerox. This five-star Morningstar-rated fund also holds Verizon ( VZ) and IBM ( IBM).

So with Xerox, we have a buyback, strong earnings, a buy rating and two famous investors in the stock. It may be time to do some homework on Xerox.

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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