9 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 96,000 investors in the community favor 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.

CAPS investors seem to approve of this group of companies, because all 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.

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 their highest prices ever. According to Standard & Poor's, there were $586 billion in buybacks last year amongst 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 tighter these days, we may be seeing far fewer share repurchase programs in 2008, or companies less willing to follow through.

A solution in black and white
As the economy has softened, display-panel manufacturer White Electronic Designs has found that its best business has been selling microelectronics to the military. Its commercial line of parts, along with its display-panel business, has been slipping. As a result, it plans to sell off its line of membrane and elastomer keypads, which are used primarily for the appliance markets. Whirlpool (NYSE: WHR), for example, has been one of its biggest customers over the years, but even sales to that company have declined recently. Focusing on the military market might subject White Electronic Designs to the whims of defense dollar appropriations, but management believes it is narrowing its offerings to a niche where it has "superior technical knowledge, specialized manufacturing capabilities and an ongoing commitment to research and development."

White Electronic Designs has traditionally flown under the radar of analysts and investors. Only three analysts follow the company, and only one CAPS investor has cast a pitch for it. LouisWinthorp noted last May that it has a history of adjusting to changing market conditions, which would seem to be underscored by its recent reorganization.

I have always liked this company. They are well managed and have a steady record of adjusting as markets change...growth has been erratic at times but they do have a growing cash pile and no debt. They instituted a share buyback program, which should help put a floor on the stock...if they show consistent growth and/or EPS, through sales performance/cost management and increases in share buyback, they could really make a run at breaking the resistance at $7 which could clear the way for another run at double digits.

Foolish fallout
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