2 Stocks Insiders Have Grown to Love

11/30/2012 10:45 am EST

Focus: STOCKS

David Fried

Editor, The Buyback Letter

This pair of stocks are getting attention from management in the form of stock buybacks, which is the best kind of attention a stock can have observes David Fried of The Buyback Letter.

Our latest additions to the portfolio include Jarden (JAH), a consumer products firm, and clothing giant Gap (GPS).

We last bought Jarden in September and sold it a month later for a fast 10.06% gain. Now, it’s back! Jarden manufactures, sources, and sells consumer products worldwide. Like what? Rawlings baseball gloves, Coleman camping gear, and Sunbeam appliances.

Jarden is also one of the world's biggest makers of ski equipment, and its wide-ranging portfolio includes baby care products like the Nuk brand and outdoor gear like Marmot and K2. Bicycle playing cards and coffee are in there, too.

With a market cap of $4.03 billion, this Rye, NY-based company owns more than 120 brands, according to its CEO. Revenue has gone from about $300 million in 2002 to $7 billion in 2011, with 40% of its sales generated internationally.

Chairman Martin Franklin said the company was strengthening its balance sheet so it could pay down its more expensive debt or "take advantage of value creating opportunities," a hint that it might make more acquisitions. In the last 12 months, management has reduced shares outstanding by 12%.

Meanwhile, Gap is one of the world's largest specialty retailers, with some 3,200 stores in 39 countries. It has some of the most recognized apparel brands in the world, such as Gap, Banana Republic, and Old Navy.

We’ve bought it several times recently—once in 2010 and most recently in July 2012 (sold a month later for a 6.4% gain).

Founded in 1969 and based in San Francisco, California, the company is focusing on growing internationally and gaining market share at home by offering items at lower prices and improving its merchandise selection.

Sales in Asia account for 8% of their total revenue and grew at a 12% rate in 2011 year over year, to $1.18 billion.

They have a strong presence in Japan with 150 stores and are seeking to expand their China presence to 45 stores from 15 by 2014. Revenue per square foot in Asia is a respectable $784.

Consumer confidence is on the rise again. Management has reduced shares outstanding by 5.7% in the last 12 months.

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