Thursday, November 29, 2007

A Couple Stocks with Huge Buyback Programs

I just wanted to point readers to these two high quality companies that have initiated massive share buybacks.

1. Cisco (CSCO) – Cisco just increased the amount of their share buyback plan by $10 billion bringing their total buyback program up to $62 billion. With a market cap of 170 billion this buyback represents approximately 36% of their outstanding shares. In further support of the stock David Dreman, a respected and successful value investor has recently been a buyer.

2. American International Group (AIG) – AIG has been aggressively buying back it’s shares over the last year (69 million shares) and will be adding another $8 billion to it’s buyback plan. Supporters of the stock include famous investors Micheal Price and Bruce Kovner who both have positions in AIG.

In my opinion any company that is undertaking massive share buybacks are at least worth taking a look at, as it indicates that the management of the company believes that the shares are fundamentally undervalued and are willing to put their money where their mouth is.

19 comments:

Warren said...

I have read mixed reviews on buybacks, but the common-sense thinking to me is that these companies are making a healthy profit and don't see any decent R&D opportunities, so rather than spending blindly they are creating value for all shareholders.

Although I'm a little surprised to see a company like Cisco making big buybacks. JNJ also announced up to I believe $10b in buybacks a few months ago.

MG said...

Home Depot also has a huge one. The shares are cheap for sure, but whether they are mispriced remains to be seen as the U.S housing mess could hurt them for years.

Anonymous said...

I don't hate buybacks but I'm not a huge fan of spending BILLIONS in a buyback program. Sometimes I think the buyback program is used soley to get bigger bonsues for management team by reaching stock increases that make thier options more valuable. I mean, yeah it helps all shareholders, but a dividend increase would be nice. Why not give a $10 billion dollar dividend? That would benefit the holders of stock right NOW.

S. B. said...

Hmmm...I think Cisco would be an unusual pick for Dreman's style. Worth looking into his rationale...

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