7 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 of those firms the 110,000-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; Motley Fool CAPS.

Investors at CAPS appreciate this group of companies announcing buyback programs -- most have received three-star or better ratings. Yet it should be noted that just because a company has announced a buyback program doesn't mean it has to follow through. 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 $138 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.

Drink up
It's long been a tenet of investing that regardless of how the market does, whether it's hitting new highs daily or tanking on fears of recession, people will continue to pop the top on a Coca-Cola. That still remains true for the most part, but global volume growth of just 3% is a three-year low for the company, and profits dropped 23% in the most recent quarter.

Yet investors like CAPS members blade5adj find enough good news remaining in the earnings report to feel positive about the future:

I'm looking past the one time impairment charge of 40 cents a share, and instead looking at the fact that they beat the analyst consensus estimate of 96 cents per share by 5 cents. I think that with a weaker dollar, and their growth abroad (they had growth of 5% in case volume internationally), Coca-Cola will only outperform the market. Plus everything is undervalued right now. I mean, how would you value the coke brand? It transcends language.

Managing risk
When a company is in the business of helping others manage their risk associated with commodities, you expect it to be able to manage its own risks fairly well. While that's generally been the case with FCStone, the company was hurt this past quarter by maneuvers that were slammed when interest rates were cut.

CAPS member celticspirit realizes such events are part of the investment reality surrounding FCStone, but as he noted earlier this year, the volatility is such that he's not yet confident enough to invest real money:

Seems to be good and bad news with this company. Great growth but also some potential hits. Overall though if they can get their business model right they could be in the right place at the right time. I'm not confident enough to put my own money in but that's the beauty of caps

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 110,000 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.