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Top Stocks With Insider Buying, Buybacks - 63484 views
Jim Cramer liked the buys, though he said that what the banks really need "to make the bears stop growling" is more capital.
At Stockpickr, we track the recent insider purchases and buybacks for investors interested in piggybacking these moves.
The perfect setup is threefold: insiders buying the stock, the company buying back its own shares and a super investor such as Warren Buffett also making a bullish bet on the stock.
If we can get three out of three, we're in heaven. If we can get two out of three, or even one out of three, we're still pretty happy about the situation, particularly if the stock is cheap in other ways as well.
DirecTV Group (DTV) is in this week’s portfolio. The El Segundo, Calif.-based company announced that it completed its $3 billion buyback plan in May 2008. The company’s board approved a new repurchase amount of $2 billion in common stock. The repurchases will be made from time to time, and DirecTV offered no expiration date.
The company will finance the buyback with cash from operations and cash on hand, which totals about $3 billion as of Sept. 30, 2008. Since February 2006, the company spent about $8.2 billion repurchasing its own common stock.
In early November, the company reported strong third-quarter results with net income increasing 14% to $363 million while EPS increased 22% to 33 cents a share, compared with the year-ago period. Total revenues surged 15% to $5 billion. The quarter was highlighted by free cash flow, which quadrupled to $332 million during the third quarter.
"In an increasingly challenging economic and competitive environment, we're continuing to see strong consumer demand for DirecTV’s unique and differentiated content including its industry-leading HD, DVR and interactive services," said Chase Carey, president and CEO of DirecTV.
The strong quarter was propelled by a 24% decline in capital expenditures and increased operating margins.
Analysts from Wunderlich Securities have a positive view on the company. The analysts, who have a buy rating on the stock, said of the buyback: “The high threshold of repurchase activity attests to president and CEO Chase Carey's confidence in DirecTV's capacity to power through the spiraling consumer economy. This is in line with Mr. Carey's remarks at the holiday and early 2009 media conferences regarding only modest economic fallout for the U.S. business.”
They have a $33 price target for DirecTV.
It’s also good to see the D.E. Shaw Group is invested in DirecTV. Since its organization in 1988, this global investment firm has earned an international reputation for financial innovation and an extraordinarily distinguished staff. Its top holdings are Equity Residential (EQR) and Pfizer (PFE).
DirecTV owner Renaissance Technologies has increased its position by about 3.3 million shares. Renaissance is a New York-based hedge fund started by Jim Simons in 1982. It also likes Apple (AAPL) and Dish Network (DISH).
So we have a new buyback plan, solid third quarter earnings, strong analyst support and two legendary investment firms buying share of DirecTV. It may be time to add this stock to your portfolio.
Next on the list is KBR (KBR), Houston’s global engineering, construction and services company announced a new buyback program. The company did not reveal the exact repurchase amount, but it said that the company has about 160 million shares outstanding.
In the same press release, the company said that current estimates for 2009 EPS are in line with the current range reflected by analyst expectation.
On Oct. 31, 2008, KBR reported third-quarter earnings of 44 cents a share, in line with estimates and up from 35 cents a share in the same period last year. The quarter was mostly fueled by an increased amount of business from government and infrastructure.
Another positive was that backlog dramatically increased. At the end of the quarter, it was at $15.3 billion, up from $12 billion in the same period last year and from $12.6 billion at the beginning of the quarter. The company also reported that it had $1.1 billion in cash at the end of the quarter, so there’s plenty of financing available for repurchases.
Analyst John B. Rogers from D.A. Davidson has a buy rating on the stock. His 12-to-18-month price target is set at $30, almost double from Wednesday’s closing price of $15.53.
It’s also good to see that Duquesne Capital, a $4 billion dollar investment fund started by Stanley Druckenmiller in 1981, holds KBR stock. Druckenmiller went to work for his hero George Soros in 1988 and is famous for orchestrating Soros' billion-dollar raid on the British pound in 1992. He parted from Soros in 2000. He returned to Duquesne Capital to run its No Margin Fund. Duquesne also likes Qualcomm (QCOM) and JPMorgan & Chase.
So we have a new buyback, great earnings, a buy rating and a noteworthy firm buying shares. It may be time to do some more homework on KBR.
And finally, we have Financial Federal (FIF) making this week’s list. This New York-based financial services company specializes in financing construction, road transportation. The company’s board approved a $35.3 million increase in its common stock and convertible debt repurchase plan. The buyback program is now worth $55 million.
In a press release Financial Federal commented: “The Company currently has 25.8 million shares of common stock and $143.5 million of convertible debt outstanding. The repurchase program was established in June 2007 and 0.9 million shares of common stock have been repurchased for $23.4 million and $31.5 million of convertible debt has been repurchased for $30.1 million.”
Financial Federal experienced a productive first quarter, ended Oct. 31, 2008. Net income decreased during the quarter coming in at $11.7 million and EPS were 47 cents a share. CEO Paul R. Sinsheimer put it best when he commented: “We continued to produce outstanding operating results and asset quality during the first quarter of fiscal 2009 considering the extreme turmoil in capital markets and deteriorating economic conditions.”
He is bullish on the idea of a new economic stimulus package because it is centered on infrastructure programs. This program would have the potential to create a lot of business for Financial Federal.
JMP Securities had positive things to say after Financial Federal beat its estimates and posted decent results in a challenging environment. JMP was looking for EPS of 44 cents a share while FIF posted 47 cents a share. The analysts noted that credit quality remains contained and is not currently an issue. JMP has a market perform rating on the stock.
It’s also good to see that Lord Abbett likes Financial Federal stock, the fund's largest holding with a total value of more than $82 million. This fund, which has a Morningstar rating of five stars and is run by Robert Fetch, invests at least 80% of its net assets in equity securities of small companies that fall within the Russell 2000 Index at the time of purchase. Two of its other top holdings are Wells Fargo (WFC) and Kroger (KR).
So we have an increased buyback, solid quarterly results and a great investors buying shares hand over fist. It may be time to take a closer look at Financial Federal.
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:
You can also review Barron's Top Insider Purchases from the prior week.
Posted on Jan. 22, 2009