Share Buybacks Not Slowing Everywhere (DELL, CSCO, MO, GE, TXN, GS, MSFT, PG)

As 2008 looks a more shaky year and one that the stock market looks like it is trying to price in a recession, there may be one victim: the share repurchase plans and stock buybacks. But there are some companies which are going to be aggressive in repurchasing shares throughout 2008.  These are not the only ones that we think will remain opportunistic on their buybacks, but here is a handful of the ones that we expect to be active in buybacks this year:

• Dell (NASDAQ:DELL) is finally freed to start buying shares.  It hasn’t helped shares yet at all, but Michael Dell probably already initiated the first part of what may end up being $10 Billion according to their most recent announcement.
• Cicso Systems (NASDAQ:CSCO) has been a serial buyer of its own stock and that isn’t likely to stop this year as Chambers just authorized another $10 Billion for buybacks.
• Altria (NYSE: MO) is probably going to be aggressive once the old Engels situation is finally behind it and after it completes the spin-off of its Phillip Morris International later on this year.  Until these are behind it, MO has to stay on the sidelines.
• General Electric (NYSE: GE) will likely keep up its share repurchase program, although we do not expect any major surge here.  Our own personal impression was that the company is doing the buyback to appease more than it is to make itself happy.  We think it can acquire operations rather than spend too much time reacquiring itself, but shareholders may ask it to buy back more stock.
• We also believe that Texas Instruments (NYSE: TXN) will continue on its mega buyback since chip companies are so reluctant to use cash to make significant acquisitions of size with each other.
• Goldman Sachs (NYSE:GS) is probably going to continue buying its shares on the open market as the ONLY broker or major bank that can justify the use of cash since it profited largely from the CDO and mortgage meltdown.  After a rocky month, the wild card is that the company goes on a buyback hiatus.
• The monster of software, Microsoft (NASDAQ:MSFT), has more than enough cash to continue its share buybacks.  This has been a long-term plan and we expect this one to continue if any real weakness in the stock emerges.
• Procter & Gamble (NYSE: PG) is one company that will keep buying back shares.  It has that huge $30 Billion allocation for buybacks and the company is a cash cow in good times and bad.  The only issue that would interrupt this is probably if it decided to make a large buyout that isn’t known today.

We have been compiling a list of major companies that have been buying back their stock over the last few years.  Soon we’ll release this list with our candidates who we think are going to have to put the buybacks on hold because they will need the cash during the economic slowdown we are witnessing.  If you look through the Powershares Buyback Achievers ETF (PKW) you will see there are many updated holdings in this group that will need to ratchet down their share repurchase activities to save cash and capital ratios.

Jon C. Ogg
January 8, 2008

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