We’re less than halfway through 2014, and it’s already clear that this year has brought some changes that will require individual and institutional investors alike to rethink their strategies. One telltale indicator is that recently we’ve seen a handful of market bellwethers announce hefty share repurchase programs. In 2013, approximately 80% of the companies listed on the S&P 500 has bought back their stock, shelling out a whopping $477 billion. That’s a 29% increase over 2012! And 2014 is shaping up to be an even bigger year for share repurchase programs.
So today I want to explain exactly why this is great news for investors and then point you to ten companies engaged in multi-million and billion-dollar stock buybacks that deserve a closer look. Seven of these are excellent buys at current prices, two are outright sells and one is currently a hold.
But first let’s discuss why I consider stock buybacks a plus for investors:
- It’s a sign that a company considers its shares good bargain.
- Having fewer shares on the market reduces share price fluctuations.
- Stock buybacks increase earnings per share—helping a company beat analyst estimates when they announce quarterly results.
- For dividend-paying companies, buying back stock means that there are fewer shares that require a quarterly dividend payment.
With all of these benefits, it’s no wonder that many companies are relentlessly buying back their stock. Now, finding out which companies are engaged in share repurchase programs requires some research, so today I’ve compiled a list of the biggest stock buyback launches that you should keep on your radar. (Of course, while a stock buyback program is a good sign for a company, it’s not a green light for a buy recommendation, so I’ve added a column with my Portfolio Grader recommendation for each stock.)
|Ticker||Company||Buyback Amount||Quantitative Grade||Fundamental Grade||My Take|
|AAPL||Apple Inc.||$90 billion||A||B||Strong Buy|
|LUV||Southwest Airlines Co.||$1.5 billion||A||B||Strong Buy|
|ABC||AmerisourceBergen Corp.||$1.15 billion||B||C||Buy|
|H||Hyatt Hotels Corp.||$685 million||B||A||Buy|
|IBM||IBM Corp.||$5.8 billion||B||B||Buy|
|APA||Apache Corp.||$1.42 billion (approx)||C||C||Hold|
|F||Ford Motor Co.||$1.8 billion (approx)||D||C||Sell|
|GILD||Gilead Sciences||$5 billion||F||C||Sell|
What can we take away from this? Stock buybacks can be a powerful indicator for investors, but it takes more than a hefty share repurchase program to pass my screening tool.