10 Stocks Shrinking Shares

Wall Street considers stock buybacks to be 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, then consult Motley Fool CAPS to see which of them the 97,000-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:

Company	Buyback Announcement Date	Amount of Buyback	CAPS Rating (out of 5)
Genentech (:DNA)	4/15/2008	150 million shares	****
Movado	4/15/2008	1 million shares	****
Monsanto (NYSE:MON)	4/16/2008	$800 million	****
Piper Jaffray (NYSE:PJC)	4/16/2008	$100 million	*
Fidelity National Information Services	4/17/2008	$250 million	*****
People's United Financial	4/17/2008	5% of shares	**
Schlumberger (NYSE:SLB)	4/17/2008	$8 billion	*****
Tibco Software (:TIBX)	4/21/2008	$300 million	***
Cymer (NASDAQ:CYMI)	4/21/2008	$100 million	***
Cognex	4/21/2008	$50 million	*

Sources: Company press releases, Motley Fool CAPS.

Investors at CAPS seem to approve of this group of companies announcing buyback programs; most have given them three-star or better ratings. Yet just because a company has announced a buyback program doesn't mean it has to follow through.

Buybacks have been partially fueled by the easy credit policies of the past few years. 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 among S&P 500 companies, with $138 billion in the fourth quarter alone. Yet that figure was well below the record $172 billion recorded in the third quarter. With credit policies tight, we may be seeing far fewer share repurchase programs in 2008 or companies less willing to follow through.

Ayn Rand for techies
The beauty of service-oriented architecture, or SOA, is the ability to integrate seemingly disparate features of disjointed programs. Applications from different vendors can work together as a whole by loosely coupling the operating systems and underlying program languages, then passing data between them. The management of Tibco Software sees the company becoming the "VMware for software."

What VMware (NYSE: VMW  ) does is allow different computers to communicate independently of their operating systems by creating a virtual world in which they can make their information portable. Tibco seeks to do that with its software programs.

Yet as the ranks of independent middleware providers thin due to acquisitions, investors begin to see Tibco as an attractive takeover candidate in its own right. Indeed, four of the five pitches for Tibco to outperform the market since the beginning of the year have stressed the belief that it makes for a buyout target. CAPS investor svannuffel, for example, noted in January that the stock's decline after earnings made it a low-risk takeover opportunity:

One of the few independant integration software suppliers that can be a target for takeover (HP ?). Also its a sound company that went down recently so the risk is low.

Both BypassTheBull and bluetrex held similar views. "Beaten down, but still has life," said BypassTheBull. "Maybe a takeover target at these levels." Bluetrex said, "Little downside, potential takeout."

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 97,000 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.