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 new or expanded stock buyback programs, then consult Motley Fool CAPS to see which of those firms the 180,000-strong investor community favors most. If CAPS' top investors endorse the prospects of companies announcing buybacks, maybe Fools should take notice.
Here are some of the latest companies to announce share repurchase programs over the past month:
|
Stock
|
CAPS Rating
(out of 5)
|
Buyback Amount
|
New or Expanded
|
| ConocoPhillips (NYSE: COP ) |
***** |
$10 billion |
Expanded |
| Diana Shipping (NYSE: DSX ) |
**** |
$100 million |
New |
| OpenTable (Nasdaq: OPEN ) |
* |
$50 million |
New |
But don't forget, Fools -- a company isn't obligated to repurchase shares just because it announced its intention to do so. So don't use this list as a reason to buy by itself; rather, use it as a launching pad for additional research.
Shining a light on growth
Yes, the $10 billion share buyback program announced by ConocoPhillips is huge, but then so is the $15 billion capital expenditure investment it's going to make. Add in that it's splitting itself in two, and the oil and gas giant is offering investors a multifaceted program to maximize shareholder value.
The spinoff of Phillips 66 was announced back in July and will result in ConocoPhillips being an exploration and production company; Phillips 66 will be a publicly traded refining and marketing operation. As an E&P play, Conoco will focus about $8.5 billion in North America, improving its Eagle Ford and Bakken shale projects while bolstering oil sands operations in Canada. It was Conoco that shook up refiners like Valero Energy (NYSE: VLO ) and Tesoro (NYSE: TSO ) when it agreed to sell its Seaway pipeline recently. The final part of the plan, the share repurchase program, will have the oil giant buying back approximately 155 million shares, or about 11% of its outstanding shares, for about $11 billion.
On the fundamental side of things, CAPS member ChartNSignal sees geopolitical events shaping Conoco in the future:
Fundamentals: Likely higher oil prices long-term, even with a major slowdown in Europe. It's a long story, but COP is well suited to capitalize on high oil prices. The P/E of 9.3, EPS of $7.80 and a $2.64 dividend look attractive.
You can read the technical points on the ConocoPhillips CAPS page then add the stock to your watchlist to see if the buyback signals the stock has hit an inflection point.
Getting seasick
There's no doubt that Diana Shipping is getting a discounted price for its stock with its new buyback program. The question is: With fundamentals in the dry bulk shipping market swamping everyone from DryShips (Nasdaq: DRYS ) to Safe Bulkers, is repurchasing its shares the best use of its money?
Diana's facing lower fixed revenue days next year at the same time charter rates remain low. It's been opportunistically buying new boats, but global financial crises have dampened demand and they're likely to do so for some time to come. Keeping its powder dry in preparation for the stormy seas still to come might be a better bet.
With over 95% of the more than 2,500 CAPS members rating Diana marking it to outperform the market, it seems they expect the dry bulk shipper to come through just fine. Tell us on the Diana Shipping CAPS page or in the comments section below if you think a buyback now is smart, then add the stock to your watchlist to see how it plays out.
No velvet ropes
It's been a long way down for restaurant reservation service OpenTable, which now trades 70% below its 52-week highs. Not only does it have to worry about upstarts like IAC/Interactive's Urbanspoon eating away at its dominance, but OpenTable surprised investors by walking away from Groupon's (Nasdaq: GRPN ) model, and ceased offering daily deals for diners. With the move coming as it did during a softer dining market and as the company faced higher costs because of its international expansion program, the market no longer considers OpenTable a closed book.
CAPS member Loerke finds the business has high barriers to entry that should protect OpenTable, but now that Google has purchased Zagat, is this a new, greater threat for the reservation specialist?
Tell us in the comments section below whether making an online reservation is really so unique and what Google's potential entry into the market means for OpenTable. Then follow along by adding the stock to the Fool's free portfolio tracker.
Foolish fallout
You've heard from your fellow investors -- now it's your turn. Start your research on these stocks on Motley Fool CAPS. Read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made, all from a stock's CAPS page. Sign up for CAPS today and share your best pitch for why a company buying back its shares is a reason for you to buy, too -- or not!
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