6 Stocks Shrinking Share Counts

Stock buybacks are generally considered a bullish signal on Wall Street. They 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 those firms the 79,000-strong investor community favors most. If CAPS' top investors endorse the prospects of companies announcing buybacks, Fools should take notice.

Investors at CAPS aren't particularly fond of this group of companies; only two of these stocks rate more than three stars.

A Giant of an opportunity?
You can't touch it. It demands hours of your time, but it's not even real. Yet millions of people want it, and it's proved profitable for companies like NetEase.com (NASDAQ:NTES) and Shanda Interactive (NASDAQ:SNDA). It's massively multiplayer online gaming, Giant Interactive's stock in trade.

These vast online games are becoming a niche market in which mainstream companies vie to participate. Linden Labs' Second Life has attracted Coca-Cola (NYSE:KO), Dell, and MTV to run virtual corporations on its site, replete with currency, entertainment, work, and shopping. Giant Interactive hopes to thrive within a similar sort of virtual world. Although it has only two games currently, it plans to introduce more. By offering prepaid cards to let players buy imaginary accessories in the virtual world, Giant might create some stickiness to keep its coffers full.

Giant's games are free-to-play or pay-to-play. Instead of toiling away slaying monsters and completing repetitive tasks to empower your character, Giant also lets you buy your way to superiority. This new approach to online gaming has CAPS All-Stars like Roberto73,with his 94-plus player rating, believing that Giant will be able to outperform the market: "New approach to MMO games. Set to be a leader in the market for a long time to come."

Others, like CAPS player johndila, see the younger, increasingly consumerist generation in China as a potential driver for future growth: "Large young chinese population with disposable income. Gaming culture."

Giant Interactive only went public last month, and the competition in this area is pretty rough-and-tumble. Disappointing returns have major corporations rethinking their participation in Second Life, and younger consumers' tastes are notoriously fickle. There's no guarantee that Giant's next offering will enjoy the same popularity as its current ZT Online, or that its target demographic won't quickly tire of sinking money continuously into virtual worlds.

Until then, however, Giant's opportunity looks massive.

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 79,000 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.