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, Sears Holdings (SHLD) is in this week’s portfolio. The largest department-store in the U.S. announced that it will add $500 million to its buyback plan. This amount is in addition to $72 million worth of common stock remaining from previous repurchases.

Since the buyback plan was initiated in the third quarter of 2005, Sears has repurchased about 41.4 million common shares, worth roughly $4.9 billion. As of Nov. 28, the company had approximately 123.6 million common shares outstanding.

Bruce Johnson, Sears’ interim CEO and president, commented: “We believe that our shares represent an attractive investment for our shareholders. Given the difficult retail environment and its effect on our free cash flow, we have reduced our rate of repurchases throughout 2008 as we worked to retain flexibility to pursue opportunities.”

On Dec. 2, 2008, the company run by hedge fund manager Edward Lampert reported third-quarter results with a net loss of $146 million, or $1.16 a share, as the company closed 14 stores and announced that eight more closures would soon follow. A year earlier, the company reported a profit of $4 million, or 3 cents a share. The company has more than 3,800 stores in the U.S. and Canada.

Total revenue sank 8%, to $10.7 billion from $11.6 billion. For U.S. locations, same-store sales dropped 10.6% and fell 7% at Kmart stores, bringing the total same-store sales down 9%. The Hoffman Estates, Illinois-based company had cash and equivalents of $1.2 billion on Nov. 1, down from $1.5 billion a year earlier.

"We believe we have positioned ourselves well for a difficult holiday shopping season. We have reduced our inventory levels, cut expenses, and announced the closing of select underperforming stores as part of our ongoing review,” said Johnson.

We were glad to see that the Citadel Investment Group likes Sears’ stock. Citadel, a $20 billion Chicago-based hedge fund founded by billionaire trader Kenneth C. Griffin, is one of the world's largest hedge funds. The firm is known for its daily trading volume, which amounts to 1% to 2% of daily trading activity in New York and Tokyo. From inception through 2006, Citadel earned 25% annual returns. It is also buying Wal-Mart (WMT) and General Dynamics (GD).

Another top-notch firm that’s putting tis money into Sears is Legg Mason. Founded in 1899, Legg Mason is a leading global asset management firm headquartered in Baltimore. It owns almost 9.5 million Sears shares, worth over $870 million. In its portfolio you’ll also find The Walt Disney Company (DIS) and Johnson & Johnson (JNJ).

So we have an increased buyback plan, rough third-quarter earnings and two immensely successful investment firms buying Sears shares. Hopefully Lampert will be able to steer this giant department store in the right direct in the near future.

Next on the list is L-3 Communications (LLL). The New York City-based aircraft contractor announced a new share repurchase program worth $1 billion in common stock. The new program, which is effective immediately, is L-3’s third buyback plan and will expire in two years. The company added that the repurchases will be financed from cash on hand and cash from operations and will be made from time to time at management’s discretion.

"We are very pleased to continue our commitment to delivering value to our shareholders through this new repurchase authorization. Returning cash to our shareholders is a key element of our disciplined capital deployment strategy," said Michael T. Strianese, chairman, president and CEO. "This new authorization underscores our confidence in L-3's strong fundamental business position, our growth and earnings prospects and our ability to continue to generate strong cash flows for 2009 and beyond."

L-3 recently entered into an agreement to buy Chesapeake Sciences, which develops anti-submarine warfare systems. Its high-tech products include sonar arrays for use in onboard submarines and surface ship combatants. Chesapeake Scienes is expected to generate $70 million in sales during 2009.

After Cowen attended L-3’s annual Investor Day conference, it issued a bullish note on the stock. Cowen has an outperform rating on this “low-risk defense play.” Analyst Cai von Rumohr explains: “L-3’s platform-agnostic sales mix, low pension risk, and coherent plan for 10% plus EPS growth make it an attractive relative safe haven for the Administration changeover.” L-3 is Rumohr’s favorite defense play.

It’s also good to see that Pzena Investment Management believes that L-3 will take off. This $16 billion firm is a classis value investment manager that bases its investments on one overriding question: Are the problems that currently cause a stock to be cheap temporary or permanent? Its other top holdings are Bank of America (BAC) and Microsoft (MSFT).

Another superstar firm that holds L-3 in its portfolio is Navellier & Associates, a $3.8 billion fund run by Louis Navellier, who has been dedicated to finding and exploiting inefficiencies in the stock market since 1980. Navellier's disciplined process is designed to identify stocks that should contribute significantly to overall portfolio outperformance against relative benchmarks. His other top holdings are Potash (POT) and Lockheed Martin (LMT).

So we have a buyback, a recent acquisition, a bullish report with an outperform rating, and two hugely successful investment company buying shares. It might be time to add L-3 to your portfolio.

And finally we have Genuine Parts (GPC) making this week’s list. The Atlanta-based maker of auto and truck parts announced that its board approved the repurchase of 15 million shares of common stock. This amount is on top of 3.6 million shares left over from the company’s 15 million-share buyback plan, which was authorized in August of 2006.

Tom Gallagher, chairman, president and CEO stated: “The Company will continue to make purchases from time to time on the open market or in unsolicited negotiated transactions.” Gallagher added: “We are pleased with the progress in the current repurchase program and believe this additional authorization will help to further enhance shareholder value.”

In addition to the buyback, the company also declared a quarterly cash dividend of 39 cents a share on the company’s common stock. This is the 52nd year in a row that Genuine Parts has increased its dividend.

Genuine Parts primarily makes replacement parts for automobiles under the brand name Napa. it also engages in industrial replacement parts, office products and electrical and electronic materials. The company distributes in the U.S., Mexico, and Canada.

On Oct. 17, the company reported third-quarter results, with net income increasing 2% to $131 million, or 81 cents a share, from $128.6 million, or 76 cents a share, earned in the same period last year. Total sales jumped 3% to $2.9 billion. Its electrical products segment was the star of the quarter, helping the company overcome slowness in the automotive segment.

We like to see that Gabelli upgraded Genuine Parts to buy from hold. Analyst Phan Le said: “For the remainder of the year, the industrial and electrical segments should continue to perform well. Industrial performance continues to be driven by strong demand from customers in the Iron, Steel, Pulp and Paper, and Food industries. Similarly, the Electrical group continues to see strong sales growth.” GPC is down 30% from its 52-high, and Le considers this a buying opportunity.

It’s also good to see the Renaissance Technologies is buying Genuine Parts stock. Renaissance is a New York-based hedge fund 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. Renaissance's other top positions include Amgen (AMGN) and Apple (AAPL).

Dodge & Cox is another famous hedge fund that likes GPC. Dodge & Cox is a $100 billion-plus investment fund founded in San Francisco in 1930. The firm’s Stock Fund has posted an annual average return of 14.47% over the past 10 years and 14.9% over the past 20 years, easily outperforming the S&P 500. Its top holdings include Hewlett-Packard (HPQ) and Comcast (CMCSA).

So we have a huge buyback, a dividend, solid third quarter earnings, an upgrade and two legendary investment firms buying shares. That’s a great foundation for this stock to take off from.

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

For the 10 most-recent portfolios, check out:

Top 10 Insider Purchases and Buybacks LXXV

Top 10 Insider Purchases and Buybacks LXXIV

Top 10 Insider Purchases and Buybacks LXXIII

Top 10 Insider Purchases and Buybacks LXXII

Top 10 Insider Purchases and Buybacks LXXI

Top 10 Insider Purchases and Buybacks LXX

Top 10 Insider Purchases and Buybacks LXIX

Top 10 Insider Purchases and Buybacks LXVIII

Top 10 Insider Purchases and Buybacks LXVII

Top 10 Insider Purchases and Buybacks LXVI

You can also review Barron's Top Insider Purchases from the prior week.

Posted on Dec. 4, 2008