At Stockpickr.com, we strive to keep track of insider purchasing and buybacks each week. Here's the perfect setup in my mind: insiders buying the stock, the company buying back its own shares and a super-investor like Warren Buffett also buying shares. If I can get three out of three, I'm in heaven. If I can get two out of three, or even one out of three, I'm still pretty happy about the situation, particularly if the stock is cheap in other ways as well.

Each Thursday we update the Stockpickr Top 10 Insider Purchases and Buybacks portfolio, featuring stocks that recently have seen big insider purchases or new buyback programs as well as super investors accumulating shares.

For instance, AutoZone (AZO) is in this week’s portfolio. The nation’s leading automotive retailer announced that it will repurchase an additional $500 million of the company’s common stock. AutoZone’s ongoing buyback program now totals $7.4 billion; this amount includes the new $500 million authorization.

Bill Giles, AutoZone’s Executive Vice President and CFO commented: “AutoZone's strong financial performance has allowed us to continue to repurchase our stock while maintaining strong credit metrics.” He continued: "Although the financial markets remain challenging, we will continue to utilize share repurchases within the bounds of a disciplined capital structure to enhance stockholder returns while maintaining adequate liquidity to execute our financial plans."

While most stocks have taken a beating over the past year, AutoZone has performed quite well. The S&P 500 index is down about 33% in the past year, while AutoZone’s share price has surged more than 25%.

On Dec. 9, 2008, the Memphis-based company reported first-quarter results with total sales of $1.5 billion, an increase of 1.6% from the same period last year. Operating income increased by $1.2 million to $238.5 million. Diluted EPS surged 10.1% to $2.23 a share from $2.02 a share in the year-ago period.

AutoZone opened 30 new stores and replaced two new stores in the U.S., and it opened two new stores in Mexico during the first quarter. As of Nov. 22, 2008, there were 4,122 stores in the U.S. and 150 stores in Mexico.

After AutoZone reported its solid first quarter, analysts from Gabelli issued a bullish note on the stock, noting the company’s strong cash flow generation at 5% to 6% a year and management’s dedication to repurchasing shares.

It’s also good to see that Renaissance Technologies owns shares of AutoZone. This New York-based hedge fund was started by Jim Simons in 1982. Simons only hires Ph.D.s, and the fund mainly employs computer-based models to predict price changes in easily traded financial instruments. The fund is highly secretive, but we know that its top holdings are UST (UST) and Wal-Mart (WMT).

We also like to see that the global investment firm D.E. Shaw Group is buying shares of AutoZone. Since its organization in 1988, the firm has earned an international reputation for financial innovation and an extraordinarily distinguished staff. D.E. Shaw encompasses a number of closely related entities with more than 1,000 employees and approximately $50 billion in aggregate investment capital. Its top stocks are Equity Residential (EQR) and Pfizer (PFE).

So we have a new buyback, strong first-quarter results, analyst support and two top-notch investment firms buying shares. It might be time to take a closer look at AutoZone.

Next on the list is Shanda Interactive Entertainment (SNDA). The Shanghai-based internet entertainment company recently increased its buyback plan from $200 million to $300 million. This amount includes $175 million in American depositary shares that the company agreed to repurchase in an earlier buyback plan.

The Internet video game company reported strong third-quarter results on Dec. 1, 2008. Total revenues increased to a record $137.3 million, 42.7% better than the year-ago period and 11.8% better than the previous quarter. Operating income jumped 50% from the same period last year to a record $56 million. Diluted earnings per ADS came in at 68 cents a share.

"We are pleased to report another solid quarter despite the global financial turmoil," said Tianqiao Chen, chairman and CEO of Shanda. "Our third quarter results demonstrate the strength, breadth and balance of our company, as our 3C strategy continued to deliver. We are confident that the online entertainment industry will be more resilient through the economic cycle.”

After Shanda’s third-quarter results beat expectations, analysts from Needham had positive things to say. They believe Shanda is well-positioned to weather a slowdown in the Chinese economy. Online games are a cheap form of entertainment; therefore, online games will be less sensitive to the economy than other industries will be.

Analyst Mark May added: “We believe Shanda, with its history of strong execution and industry leading pipeline is in a prime position to take advantage of the strong secular growth trends in online gaming in China.” Needham has a buy rating and $45 price target on Shanda.

Another bullish note for Shanda is that Citadel Investment Group sees upside potential. Citadel, a $20 billion Chicago-based hedge fund founded by billionaire trader Kenneth C. Griffin, is one of the world's largest hedge funds. Citadel boasts: “Through a combination of world-class talent and the use of advanced technology to support them, we relentlessly seek to initiate and capitalize on change in the global financial markets with the goal of remaining at the forefront of the industry.” Its other top stock picks include Apple (AAPL) and News Corp (NWS.A).


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 LXXVII

Top 10 Insider Purchases and Buybacks LXXVI

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

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

Posted on Jan. 7, 2009