10 Stocks Shrinking Shares

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 stay consistent, share repurchases can even increase earnings per share by dividing the same amount of earnings among a smaller pool of outstanding shares.

Today we'll draw up a list of companies that have announced stock buyback programs, then consult Motley Fool CAPS to see which ones the 89,000-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)

Alaska Air Group

March 13

$50 million

**

QC Holdings

March 13

$20 million

*

American Tower

March 14

$1.5 billion

**

CSX (NYSE:CSX)

March 17

$2.4 billion

*****

NYSE Euronext (NYSE:NYX)

March 18

$1 billion

*****

Baxter International (NYSE:BAX)

March 18

$2 billion

****

3SBio (NASDAQ:SSRX)

March 19

$20 million

****

Guess? (NYSE:GES)

March 19

$200 million

***

Brookdale Senior Living

March 19

$150 million

**

BluePhoenix Solutions (NASDAQ:BPHX)

March 20

800,000 shares

*****

Sources: Company press releases; Motley Fool CAPS.

Looks like investors at CAPS have mixed feelings about this group of companies. Almost half on the list have low one- and two-star ratings. But realize -- just because a company has announced a buyback program doesn't mean it will. A company is not obligated to repurchase shares just because they've announced their intention to do so.

Buybacks have been fueled in part 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 might see far fewer share repurchase programs in 2008, or fewer companies willing to follow through.

A not-so-anemic answer
When the patent on Epogen, the anemia drug manufactured by U.S. biotech giant Amgen (Nasdaq: AMGN  ) expired in 2000, it sold the rights to sell the drug in China to Japanese brewer Kirin, which has a Chinese pharmaceutical division. One competitor to Kirin is 3SBio, which has been selling its copycat version of Epogen, called Epiao. That success has allowed it to fund development of several cancer drugs. It undercuts the competition on price, while focusing solely on the Chinese market.

Despite this, the stock recently fell to its lowest level since the company's IPO; Q4 earnings results fell below analyst expectations. With guidance for 2008 also falling short, some wonder whether 3SBio will need a shot of adrenaline soon to get it going.

Reaction by CAPS investors has not been as anemic. Almost 97% of them see the Chinese biotech outperforming the market, and some are like GAME05, who finds 3SBio to be a "cash machine," and just last week found it incredible to be sold off so sharply.

Wow, has this thing gotten oversold or what? ... Cash is $115M. Market cap is $180M. And here's the kicker: PEG = 0.25. This is both a great growth AND a great value play. What is the downside risk in that much cash?

Similarly, CAPS player zzlangerhans thought earlier this month that 3SBio not only is profitable now but has new products under development for the future that will contribute to revenues and profits.

This is a profitable small cap biotech with a market cap below 170M... When the small cap market emerges from its current funk ... I expect the cap to recover... Company also has three products in phase III trials, although admittedly EPIAO and TPIAO are just up for expanded use.

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 89,000 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.


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