4 Insider Favorites for 2012

01/24/2012 8:30 am EST


David Fried

Editor, The Buyback Letter

It’s a good time to look at some of the new picks to our top portfolio, writes David Fried of The Buyback Letter.

Our Buyback Premium Portfolio is beating the S&P 500 by more than 30% since its inception in 2000. Here’s a look at four of our recent additions to this portfolio.

ConocoPhillips (COP)
ConocoPhillips is one of the largest integrated energy companies in the US and a worldwide leader in refining. It has extensive oil and gas reserves, which will increase in value as energy prices rise.

The stock’s 52-week range is $58.65 to $81.80, earnings estimate for 2011 is $8.63 per share and for 2012 is $8.39 per share. The annual dividend is $2.64 per share, which yields 3.6%.

Conoco has been a robust repurchaser over the years. The company has reduced shares outstanding in the last 12 months by 9.6%.

Seagate Technology (STX)
Seagate Technology is the worldwide leader in hard disk drives.

Extensive flooding last fall in Thailand—the site of numerous factories for many tech manufacturers and suppliers—has impacted the industry. Big names in the sector have reported that the global supply of hard disk drives would be seriously affected, possibly leading to a shortage.

However, Seagate just raised its revenue outlook for its fiscal second and third quarters, saying the impact from the Thailand flooding wasn’t as bad as expected on its operations, which should give it an advantage over rivals.

Seagate reported preliminary second-quarter revenue of $3.1 to $3.2 billion, compared to consensus of $2.81 billion. For the third quarter, Seagate projects revenue of $4.2 to $4.5 billion compared to consensus of $3.62 billion. Seagate reduced shares outstanding by 9.7% in the past 12 months.

Credit Acceptance (CACC)
A provider of auto loans to consumers, regardless of their credit history. The loans are offered through auto dealers, in what amounts to a win-win.

The dealers benefit from sales of vehicles to consumers who otherwise could not get financing, and customers who can’t get a loan for a vehicle get a second chance to establish their own credit. The program allows dealer-partners to share in the profits not only from the sale of the vehicle, but also from its financing, and enables them to advertise “guaranteed credit approval.”

Third-quarter income was $50 million ($1.91 per share), compared to $42 million ($1.48 per share) in the same period the prior year. In the last 12 months, management has reduced shares outstanding by 5.2%.

Coca-Cola Enterprises (CCE)
This company bottles and sells Coca-Cola drinks in Europe. It is the third largest Coca-Cola bottler in the world.

Although it is hard to imagine that the ubiquitous Coke—the world’s most valuable brand—hasn’t already flooded the globe, CCE has recently announced plans to invade the Middle East by buying half the equity in the beverage business of Saudi Arabia-based Aujan Industries.

The Middle East is considered a high-growth region, with the “highest rates of non-alcoholic ready-to-drink per-capita consumption,” according to CCE execs.

2012 earnings per share are anticipated to rise 10% to 12%, with a 5% to 9% increase in expected revenue.

CCE has been a consistent repurchaser, with $1 billion approved in buybacks in 2011 and another $500 million expected in 2012. It has reduced shares outstanding by a whopping 7.9% in the last 12 months.

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