4 Companies Putting Money in Buybacks

• Email
• Share
• Print

The first CEO who can't put some positive spin on bad news probably hasn't been born yet. But it's harder to find management teams and corporate boards that walk the talk and put their money where their mouth is. How do you find quality leadership like that?

Let's imagine for a moment that you're on the board of a major American business. Your stock price has plummeted over the last year, but you still have more cash than debt on your balance sheet and the last quarter was profitable. In other words, it looks like your company will be around for a while yet. That sounds like a great time to buy back a few shares!

The boards of these companies did exactly that in the past month:

Company	% off 52-week High	Net Cash (millions)	Market Cap (millions)	CAPS Rating
CA (NYSE: CA)	-35%	$161	$9,100	**
QLogic (Nasdaq: QLGC)	-45%	$381	$1,430	*****
Net 1 UEPS Industries (Nasdaq: UEPS)	-66%	$131	$671	*****
Netgear (Nasdaq: NTGR)	-72%	$202	$361	*****

Data from Capital IQ, a division of Standard & Poor's, in turn a division of McGraw-Hill, which is a division of ... oh, that's all? And Yahoo! Finance.

Data management specialist CA announced an up to $250 million buyback program two weeks ago, right after networking expert Netgear's authorization to buy back up to 6 million shares -- about $65 million at today's share price. Storage specialist QLogic settled for an up to $300 million program, and payment service Net 1 dipped in for an up to $50 million repurchase.

These buyback programs range in boldness from about 3% of the outstanding shares (CA) to approximately 20% (QLogic), but they all send the same message: Where Mr. Market sees doom and gloom, each of these corporate boards sees an opportunity to reward shareholders.

Moreover, these businesses share a fundamental stability with solid balance sheets and the ability to scrape out profits even in these difficult times. The buybacks, then, aren't some forlorn Hail Mary tactic to win back the love of false-hearted investors -- because QLogic and company don't need that.

The big deal
Why should you care? Let me put it this way: I can't think of anybody with a better view of a company's challenges and opportunities than its board of directors. These people have full insight into every nook and cranny of the business, are responsible for the long-term business strategy, and a committee of its members know about the financial statements in exquisite detail.

From that perspective, I think it's telling that Yahoo! (Nasdaq: YHOO) reduced its buyback program considerably this year. I think that has played somewhat of role in Yahoo's stock price decline. By contrast, when a board under attack signs off on a generous share buyback plan, I hear them screaming "buy this stock now!" Five-star CAPS grades back most of them up, and even unloved CA has dug itself out of the one-star cellar since its buyback was announced.

The daring and the docile
Finding the few brave businesses that dare to swim against the torrent of bad market news and investor skepticism is inspiring. These companies are fundamentally strong enough to make it through this downturn, and they're making a serious effort to reward their investors for sticking with the stock through thick and thin. I'm sorely tempted to become one of those intrepid owners, because it's easy to see great long-term returns on some of these investments.

But it also raises the question of why more businesses don't take this opportunity to put cash reserves to good use. Google (Nasdaq: GOOG), for example, has spent around a measly $38 million on buybacks in the last 12 months. With over $14 billion in the bank and no debt, Big G could do better. And Apple (Nasdaq: AAPL) hasn't bought back too many shares since 2003. I'm not saying that Google and Apple are bad investments, but they both could possibly improve their stock performance with share buybacks.

"Put up or shut up," hard-boiled poker players say when they're in a tough spot. We just found a few businesses that go all in. They certainly deserve some investor attention, and maybe even a few of your hard-earned dollars.

Further Foolishness:

• Rick Munarriz disagrees with my view of Yahoo!
• 5-Star Stocks Poised to Pop: NETGEAR.
• This is the opportunity you have been waiting for, too.