December Buybacks Over $15 Billion, More For 2011 (AET, CB, CAG, ECA, HD, INTC, MKL, SWY, SYK, TEVA, CSCO, BAC, WFC, JPM)

There have always been questions about whether stock buybacks are an effective return of cash to shareholders.  The theory is a simple one:  reducing the number of shares outstanding boosts the price of the stock.  It does not always work out that way.  Still, some companies are willing to spend billions of dollars on themselves and many new buyback plans are coming.  We wanted to track the big buybacks so far which have just been announced or updated since the start of December.  While not all the programs are new, the total came to a sum of more than $15 billion.  That $15+ billion does not even count many of the smaller or less obvious buyback updates.

The companies which we have updates on are Aetna Inc. (NYSE: AET), Chubb Corporation (NYSE: CB), ConAgra Foods, Inc. (NYSE: CAG), Encana Corp. (NYSE: ECA), The Home Depot, Inc. (NYSE: HD), Intel Corporation (NASDAQ: INTC), Markel Corp. (NYSE: MKL), Safeway Inc. (NYSE: SWY), Stryker Corp. (NYSE: SYK) and Teva Pharmaceutical Industries Limited (NASDAQ: TEVA).

We also took a look at the ongoing example of Cisco Systems Inc. (NASDAQ: CSCO).  For buybacks in 2011, there is already evidence that Bank of America Corp. (NYSE: BAC), Wells Fargo & Co. (NYSE: WFC), and J.P. Morgan Chase & Co. (NYSE: JPM) could begin significant buyback programs.

We have two insurance buyback announcements.  Aetna Inc. (NYSE: AET) approved the repurchase of $750 million of stock, which is actually in addition to roughly $257 million left in prior approvals.  We’ll call it $1 billion for short, and that compares to a market cap of just over $12 billion.  Chubb Corporation (NYSE: CB) has now authorized an additional 30 million shares for buybacks, and that appears to be the second buyback expansion in the year.  That is nearly $1.8 billion at current share prices against a market cap of nearly $18 billion.

ConAgra Foods, Inc. (NYSE: CAG) lowered its guidance for  growth in 2011, but it did expand its buyback ambitions by the $554 million received as an early repayment of notes it was owed.  ConAgra’s  plan is now close to $750 million against a market cap of $9.7 billion.

Encana Corp. (NYSE: ECA) announced that it received renewed approval for a Normal Course Issuer Bid from the Toronto Stock Exchange and it may repurchase and cancel up to 36.8 million shares.  That is roughly 5% of its outstanding and issued shares.  Its market cap is close to $21 billion.

The Home Depot, Inc. (NYSE: HD) is targeting some $2.5 billion in share buybacks ahead in 2011 versus a market cap of roughly $56 billion.

Intel Corporation (NASDAQ: INTC) CEO Paul Otellini announced that the company has recently begun repurchasing shares of its common stock after having suspended buybacks for some time.  Intel had roughly $5.7 billion remaining under an existing $25 billion buyback plan.  Intel’s market cap is more than $120 billion.

Markel Corporation (NYSE: MKL) is technically the third insurer, albeit a smaller one.  Its board of directors authorized $200 million to repurchase shares.  It had repurchased roughly $179 million under a plan begun about 5 years ago.  Markel’s market cap is close to $3.5 billion.

Safeway Inc. (NYSE: SWY) this week added $1 billion to its existing buyback plan which already had some $800 million available to repurchase shares.  Safeway’s market cap is roughly $8 billion, which would make this one of the more significant percentage buybacks compared to the float if expedited.

Stryker Corporation (NYSE: SYK) said this week that it approved the repurchase of $500 million an additional stock.  Under an existing $750 million repurchase plan, Stryker has repurchased roughly $410 million.  This compares to roughly a $21 billion market cap.

Teva Pharmaceutical Industries Limited (NASDAQ: TEVA) is one of those buybacks that came after weeks of weakness.  The company said December 1 that it would spend up to $1 billion to repurchase shares. Its market cap is roughly $47 billion.

What about existing plans as a comparison or those which are entertaining buybacks for 2011?

Cisco Systems Inc. (NASDAQ: CSCO) said in November that it was adding $10 billion to its buyback plan and it has previously authorized some $62 billion for repurchases over the years.  Its buyback effort has not driven shares higher.  Cisco has made so many acquisitions and had so many employee stock options that it may have only limited the dilution.  The market cap here is close to $110 billion.

Bank of America Corp. (NYSE: BAC) and Wells Fargo & Co. (NYSE: WFC) both  may restart buyback plans in 2011 as soon as they are cleared to resume returning capital to shareholders.   Wells Fargo’s CEO John Stumpf told investors that wants to return of capital to holders with higher dividends and share buybacks.  KBW gave forecasts for bank gains earlier in the week, then Deutsche Bank gave a big prediction.  Deutsche Bank reportedly sees a 10% share buyback announcement from J.P. Morgan Chase & Co. (NYSE: JPM).  To put that into size for comparison, J.P. Morgan has a market cap of nearly $160 billion.

As you can see, billions upon billions of dollars could be used for buybacks.  It is not all a December story.  Much may be a story for 2011 and beyond.  Some companies are opportunistic on buybacks as others announce buybacks and rarely announce buybacks.

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JON C. OGG