10 Stocks Shrinking Shares

Wall Street generally considers stock buybacks a bullish signal. Buybacks return capital to shareholders, while declaring management's belief that its own cheap shares are its best return on investment. As long as profits remain consistent, share repurchases can even increase earnings per share, by dividing the same amount of earnings among a smaller pool of shares outstanding.

Today, we'll draw up a list of companies that have announced stock-buyback programs, and then we'll consult Motley Fool CAPS to see which of them the 86,000-strong investor community favors most. If CAPS' top investors endorse the prospects of companies announcing buybacks, Fools should take notice.

Here are some of the latest companies to announce share-repurchase programs.

Investors at CAPS seem to have mixed feelings about this group of companies announcing buyback programs: Half of the list has received low one- and two-star ratings. Yet just because a company has announced a buyback program, that doesn't mean it has to launch a buyback. A company is not obligated to repurchase shares just because it's announced an intention to do so.

The easy credit policies of the past few years have been fueling buybacks. Companies didn't mind borrowing big bucks to repurchase their shares, even if they were trading at all-time highs. According to Standard & Poor's, there were $586 billion in buybacks last year amongst S&P 500 companies, with $138 billion of that amount taking place in the fourth quarter alone. Yet that figure was well below the record $172 billion recorded in the third quarter. Now, with credit policies tight, we may be seeing far fewer share-repurchase programs in 2008 -- or at least more companies that are less willing to follow through.

A digitally enhanced future
Things seemed to begin to unravel for fabless chip designer Silicon Motion in the third quarter last year, when flash memory supplies became constrained. The company got a temporary boost when it sidestepped problems and posted a 44% increase in sales and raised guidance, but even with a strong fourth-quarter earnings report last month, shares have continued to slide. Although the chipmaker continues to give hot flashes to some investors, the stock has recently set a new 52-week low.

CAPS investors' hearts are racing around Silicon Motion; 98% of them think it will outperform the market. Investor Paddleman looked at the balance sheet of the flash-memory-controller maker and found the company poised for a turnaround, in this pitch from a month ago.

I believe this stock is near its bottom. ... Excellent balance sheet indicating no debt, high gross margins and impressive revenue growth tell me this is a solid company that has been over-sold. "I'm going in!"

Similarly, CAPS player 21popsontop thinks Silicon motion has what it takes to take on the "big boys" in the industry. From earlier this month:

Taiwan is giving the big boys a run for their money in the Technology industry, and this little 487mil market cap is one of them. Check it out, their products are being used [globally] in most [everything], and they are making it tough on the big boys to keep up. Nice growth and big demand. ... Full year 2007 of $1.45 a share beating last [year's] results around [56%.] Net Profit margins 22%. ... Company [is] well run and moving forward in high speed.

Foolish fallout
You've heard from your fellow investors -- now it's your turn. Motley Fool CAPS is a completely free, fun service where more than 86,000 investors have their say every day. Sign up for CAPS today, and share your best pitch for why your favorite stock will beat or lag the market.