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 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 ones the 105,000-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.

Sources: Company press releases; Wall Street Journal; Motley Fool CAPS.
*Shares outstanding, minus shares controlled by insiders, restricted stock, and shares held by 5% owners, as per WSJ.

Investors at CAPS have mixed feelings about this group of companies, as evidenced by the fact that only a little more than half have received three-star or better ratings. And it should be noted that a company is not obligated to repurchase shares just because it has announced its intention to do so.

Buybacks have been partially fueled 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 Dealogic, there were $538 billion in buybacks last year among S&P 500 companies, with $122 billion in the fourth quarter alone. Yet announced buybacks in the first quarter of 2008 have slumped to just $76 billion. With credit policies tight, we may see far fewer share repurchase programs in 2008, or more companies issuing shares to raise money.

A naturally gaseous state
Deere has been enjoying the success of its products sales, selling its equipment to help farmers, who are planting ever more to meet rising global demand for food. Even though Deere is cautious about future demand, its shares are up by 38% over last year's level, they are also about 15% off the highs they reached at the beginning of the year. Still the company is feeling good about its ability to generate sufficient cash flows, and not only authorized an ambitious $5 billion share buyback program, but also raised its dividend 12% to $0.28 a share.

Investors see Deere's potential to leap ahead. The fall-off in shares recently presents a buying opportunity, says CAPS All-Star leohaas: 

Taking advantage of the recent sell-off in this company. [Deere] is the leader in machines needed in any agricultural business. And with demand for crops (needed for feeding people, cows, pigs, chickens, and to support demand from the growing ethanol/bio-diesel industries) only going up, so does demand for [Deere]'s products.

CAPS player LEGMAKER sees continued growth in planting, thanks to rising food prices, as fueling Deere's next rise. An excerpt:

The first thing to remember is that farming is a business, and in this business there are certain things that most likely will happen. The price of corn went up, so farmers planted more corn. This took away from soybean acres and that price followed. Then wheat shot up. ... Historically, when a market [e.g. China] starts a meat based diet [supported by corn feed], they find that it very rarely goes back to a grain based diet. ... Before the boom in pricing, corn was planted but required much more water and fertilizer. ... If your land was wet, you could rotate your crops between corn and soybeans. If your land is dry, it would be wheat and soybeans. ... With respect to this corn is still much more valuable. Since farmers are growing different types of crops, they also need different types of machinery.

Foolish fallout
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