Repurchase Cutbacks Identify the Weak… and the Poor
Standard & Poor’s just reported that third-quarter stock buybacks declined by almost 48% amongst S&P 500 firms. Cumulatively, that’s almost $156 billion less for the full year than 2007.
These repurchase cutbacks give us a window into who’s healthy – and who’s not. Companies that buy back shares have higher profits and generally outperform those that do not. Firms worried about income or financing are going to be the first ones to cut back or suspend share buybacks.
Surprisingly, the Information Technology sector accounts for 25% of all buybacks. While Exxon Mobil (NYSE: XOM) took the top spot, energy companies only accounted for 18% of buybacks. That’s low, considering their record-breaking profits this year. Does this spell trouble for gas giants in 2009?
It was technology companies that dominated the top 10 spots. In the third quarter, they were led by: Microsoft (Nasdaq: MSFT), International Business Machines (NYSE: IBM), Intel (Nasdaq: INTC) and Hewlett Packard (NYSE: HPQ).
Apparently one of the worst economic environments in almost 70 years hasn’t really hurt these tech giants. It’s nothing like the dotcom fallout. And while tech spending is expected to slow next year – a 1.6% growth rate isn’t a decline.
Companies mentioned in this article: XOM, MSFT, IBM, INTC and HPQ.
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