9 Stocks Shrinking Shares

Wall Street generally considers stock buybacks a bullish signal. 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 and then consult Motley Fool CAPS to see which of those companies the 83,000-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 like this group of companies, most of which carry a rating of three stars or better. Yet the announcement of a buyback program doesn't mean a buyback will happen. A company is not obligated to repurchase shares just because it's announced an intention to do so. And with credit policies tight, we may be seeing far fewer share-repurchase programs in 2008.

The easy credit policies of the past few years had been partially fueling the number of buybacks we'd been seeing. Companies hadn't minded borrowing big bucks to repurchase their shares even if they were trading at all-time highs. According to Standard & Poor's, there was $586 billion in buybacks last year amongst S&P 500 companies. Some $138 billion took place in the fourth quarter alone, yet that figure was well below the record $172 billion in the third quarter. That trend may now change.

Bulking up
Dry bulk shipper Genco has been able to increase time-charter rates enough to triple its profits in the past quarter, for a performance that handily exceeded analyst expectations. Rates have been rebounding, as have the shares of shippers such as Genco, Diana Shipping (NYSE: DSX), and DryShips (Nasdaq: DRYS), companies that have soared over the past year but eased back from their October peaks as concerns about the Chinese demand for ores, coal, and grain have risen.

That demand from China has attracted CAPS investors such as mrlonghaul, who early this month saw the dry bulk industry -- and Genco in particular -- as being able to withstand the recessionary winds that are blowing across the U.S. economy:

The international dry shipping sector is a stable industry that is largely supported by China's raw material import needs and its manufacturing export needs. ... This is an industry that also seems to weather recessionary and inflationary periods well, because of the need for transporting both consumer staples and raw materials. ... It offers ... low risk because both [its] sector and services are in demand even in a slowing global economy.

CAPS All-Star player pinti pointed out last December that even if China wants to cut back on demand, it can't if it wants to continue growing. And because it does want to keep growing, the entire industry will benefit.

The Shipping sector has contained some of the best performing stocks this year ... in part ... thanks to rising demand for raw materials. Once again much of this demand has come from and will continue to come from the Chinese economy ... and [its] rapid building projects to flaunt to the world in the coming 2008 Olympic Games. ... The average price of chartering a big freighter to carry raw materials from Brazil to China has nearly tripled [versus] a year ago.

You can read the entire detailed analysis.

Foolish fallout
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