Stock buybacks are generally considered a bullish signal on Wall Street. While buybacks return capital to shareholders, they also declare 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, and then consult Motley Fool CAPS to see which of those companies the 82,000-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.
|
Company |
Buyback Announcement Date |
Amount of Buyback |
CAPS Rating (Out of 5) |
|---|---|---|---|
|
Overstock.com (Nasdaq: OSTK) |
1/15/08 |
$20 million |
* |
|
MetLife (NYSE: MET) |
1/15/08 |
$1 billion |
***** |
|
First American |
1/15/08 |
$300 million |
** |
|
Williams-Sonoma |
1/15/08 |
$150 million |
** |
|
Morton's Restaurant Group |
1/16/08 |
$4 million |
**** |
|
Life Partners |
1/16/08 |
1 million shares |
** |
|
Southwest Airlines (NYSE: LUV) |
1/17/08 |
$500 million |
*** |
|
Tiffany |
1/17/08 |
$500 million |
*** |
|
Kroger (NYSE: KR) |
1/18/08 |
$1 billion |
**** |
|
Oil States International |
1/18/08 |
$50 million |
**** |
Investors at CAPS aren't particularly fond of this group of companies. Many carry a CAPS rating of three stars or fewer.
Shopping for an opportunity
Rising costs have cast a shadow over a number of supermarkets -- Kroger, Safeway (NYSE: SWY), and Winn-Dixie (Nasdaq: WINN) among them. Yet despite a taxing quarter, Kroger has been able to pass along most of those costs to its customers, who don't appear to have stopped shopping as a result. In fact, same-store sales rose last quarter, and the company raised its guidance. Yet the guidance was below what analysts were forecasting, and so the market decided to check out of its shares.
There's something to be said for stalwarts like grocers during times of economic uncertainty. While consumers may be able to cut back on their purchase of luxuries such as flat-screen TVs or gas-guzzling SUVs, they still need basic sustenance. That sort of rationale has led CAPS All-Star xthecritic, with a 97.94 player rating, to believe that Kroger will outperform the market:
No brainer. This market is ugly but people have to eat. The grocers (and the other consumer staples) will outperform during this bloodshed. Kroger is one of the better players in the grocery industry.
Even new CAPS players recognize that Kroger can still profit in the current climate, and that the company has gained ground on discount retailers such as Wal-Mart (NYSE: WMT). As CAPS newcomer cruise08 notes:
While the housing market flounders, people have to eat. They will cut back in other areas but not in food consumption. Kroger is constantly making changes to mimic their competition and [strengthen] their market share. Walmart while continuing to build more stores is losing ground to specialty chains and other types of retail stores.
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 82,000 investors have their say every day. Sign up for CAPS today, and share your best pitch for why you think your favorite stock will beat or lag the market.
