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 that some smart savvy investors are as well.

Each Thursday we update the Stockpickr Top 10 Insider Purchases and Buybacks portfolio, featuring the stocks of the week that had either big insider purchases or newly announced buybacks as well as "smart money" accumulating shares.

For instance, Potash (POT) is in this week's portfolio. The world's largest fertilizer producer announced that it will double its repurchase amount to about 10% of its outstanding common stock. The company has already completed the buyback of 15.82 million shares, or 5% of its stock, the limit allowed under its current normal course issuer bid. However, the company will ask the Toronto Stock Exchange to allow it to repurchase an additional 15.68 million shares, worth $2.36 billion. The buybacks have an expiration date of Jan. 30, 2009.

"We currently have an opportunity to use our strong cash flow to re-invest in the world's best potash assets -- our own company -- at an attractive price," said Bill Doyle, PotashCorp president and CEO. "We believe our shares are significantly undervalued versus our long-term potential."

Potash reported very impressive second-quarter earnings on July 24. As increased world grain prices boosted demand for fertilizer, Potash's profit tripled to record levels. The Canadian company earned $905.1 million, or $2.82 a share, up 217% from $285.7 million, or 88 cents a share, in the year-ago period.
Potash said its full-year outlook is robust seeing as demand for its fertilizer is still as strong as it was in July. In July, the company said it expects full-year earnings of $12 to $13, up from the April estimate of $9.50 to $10.50.

It's also good to see that Soleil Securities Group recently upgraded Potash from hold to buy based on attractive valuation. The shares have dropped 33% from their all-time high of $242 in the past nine weeks, and Mark Gulley from Soleil thinks investors should take advantage of the buying opportunity.

He commented: "Grain and fertilizer demand growth is doubling from 2% to 4%, driven by: growing middle classes in developing countries that desire more grain-intensive meat and dairy in their diets, and the dire need for higher crop yield to meet the challenges of decreasing arable land, high crop prices, and low grain inventories."

The D. E. Shaw Group is a noteworthy global investment firm that's buying Potash stock. Since its organization in 1988, the $50 billion firm has earned an international reputation for financial innovation and an extraordinarily distinguished staff. Its other top stock picks are Exxon (XOM) and Pfizer (PFE).

We also like to see that George Soros, the founder of the Quantum Fund and one of the most successful hedge fund investors ever, is betting on Potash. A $100,000 investment in his fund when he started in 1969 would've been worth $150 million by 1994. Soros' most famous investment was when he "broke the bank" in England by betting billions against the British pound on Black Wednesday in 1992. His newest positions are Hess (HES) and Consol Energy (CNX).

So we have an increased buyback, record-high earnings, an upgrade and two remarkable investors buying the stock. It may be time to take a harder look at Potash.

Next on the list is Owens-Illinois (OI). The leading producer of glass containers announced that it will buy back up to $350 million in common stock. The repurchases will take place from time to time pending on market conditions and will expire Dec. 31, 2010.

"We believe that the Company has substantial prospects for continued earnings growth and the current share price does not reflect the long term value of the firm," said Al Stroucken, chairman and CEO. "As we evaluate investment alternatives, the repurchase of our stock represents another attractive opportunity to deliver value for our shareholders."

Higher prices and lower interest expenses helped fuel stellar second-quarter results for O-I. The Perrysburg, Ohio-based company experienced net income of $231.3 million, or $1.35 a share, up from
$149.7 million, or 89 cents a share, in the same period last year. Total sales jumped from $2 billion to $2.2 billion this quarter. Although the company admitted to selling fewer bottles, the surge in profit came from the sale of higher end bottles and the weakness of the U.S. dollar against currencies where O-I has operations.

Another bullish note is that analysts from Wachovia Equity Research have an outperform rating on the stock. The analysts mentioned: "Additionally, while the company has lacked discipline in the past as it relates to free cash flow allocation, we note that a new management team, on top of recent portfolio re-jiggering has positioned the company on a solid footing over the next few years." They believe the stock should be trading in the $48-to-$52 range.

We also like to see that Renaissance Technologies is buying shares of Owens-Illinois. This New York-based hedge fund was started by Jim Simons in 1982. Its $5 billion Medallion Fund has averaged 38% annual returns, after fees, since 1989, and is considered in the industry to be the most successful hedge fund. In their portfolio you'll also find Bank of America (BAC) and Wal-Mart (WMT).

Another top-notch hedge fund with money in O-I is SAC Capital Partners. This $12 billion group of hedge funds was founded by Steven A. Cohen in 1992. Cohen is regarded by many as the best stock trader ever. His fund contains approximately $3 billion of his own money. While he is known primarily as a short-term trader, in recent years he's been taking longer-term positions. His newest positions are Pilgrim's Pride (PPC) and Estee Lauder (EL).

So we have a buyback, great second-quarter results, an outperform rating and two top-notch investment firms that see upside potential in O-I. It may be time to do some more homework.

And finally we have Ensco International making this week's list. The offshore driller with headquarters in Dallas announced that it will add $500 million to its repurchase plan. The new buyback amount was approved just as Ensco nearly completed its previous $1 billion buyback plan, by which the company repurchased 16.5 million shares worth $937.6 billion. The new buybacks will be financed with available cash.

On July 24, the company reported record second-quarter results, with net income swelling 17% to $2.96.7 million, or $2.07 a share, from $254.4 million, or $1.72 in the same period last year. Total revenue was $637.1 million, up from $548.6 in the year-ago period.

Dan Rabun, chairman, president and CEO, commented on the Company's results: "Increases in average day rates in all regions and asset classes contributed to the sequential improvement in our second quarter results, and to another record quarter."

While most U.S. companies continue their downward fall, Ensco, with its fleet of 53 rigs, has performed quite well in the face of turbulent markets. Ensco is up 10% on the year, compared with the Dow, down nearly 21% on the year.

We like to see that Jefferies has a buy rating and $85 price target on the stock. Analyst Judson E. Bailey added: "Despite the pullback in commodity prices and ESV shares, we believe ESV remains well-positioned for growth through its deepwater growth initiatives, a more robust international jack-up market than expected and near term benefits from GOM market strength."

It's also good to see the likes of Ken Fisher buying shares of Ensco. Fisher, son of famous value investor and Buffett inspiration Phil Fisher, is an investing legend now in his own right. He runs the $30 billion Fisher Asset Management, and CXOAdvisory.com ranks him as the number one market pundit out there and has tracked all his market timing calls. His other top stock picks are Schlumberger (SLB) and Microsoft (MSFT).

Another successful firm buying ESV is Glickenhaus. This 45-year-old investment company with $1.3 billion under management explains: "The guiding tenet of our investment philosophy is risk consciousness. … We believe our first obligation is the preservation of the future purchasing power of our clients' capital." Their other favorite stocks are Pioneer Natural Resources (PXD) and Valero Energy (VLO).

So we have a buyback, another case of record earnings, a buy rating and a huge price target, and two great investors buying shares hand over fist. This makes for a solid foundation for this stock to take off.

For more stocks and analysis, check out this week's Top 10 Insider Purchases and Buybacks portfolio at Stockpickr.com.

You can also review Barron's Top Insider Purchases from the prior week and Jim Cramer's "Mad Money" Buybacks.

Posted on Sept. 24, 2008