Hasbro, Inc. (HAS), Zynga Inc (ZNGA), Visteon Corp (VC): These Companies Are Set To Buy Back $30 Billion in Stock

Page 1 of 2

The recent pullback in the stock market brings a silver lining for some companies.

Those firms that have announced new or extended stock buyback programs can now retire more shares for a fixed dollar amount. And if the market slumps deeper in coming weeks and months, these buyback programs will deliver an even better bang for their buck.

I recently wrote about the stunning $455 billion in stock that has been reacquired by firms over the past four quarters, noting that the trend isn’t just a passing fad. In fact, the past two months of buyback announcements signal that the current quarter will be another sizzler.

A month ago, I took note of roughly $20 billion worth of buyback plans announced in July (which only partially reflects the full amount of buybacks that month) and I’ve tallied the buyback programs announced in August (among companies buying at least $400 million), and this new group accounts for an impressive $29 billion in share buybacks.

We can glean a few clear trends from these share buybackers:

1). The majority of these plans are simply new plans to replace old plans that have now been completed, meaning these companies buy back their shares on a regular basis.

2). Many of these stocks are valued right near the market multiple of 15 to 16 times projected earnings.

3). Many of these stocks offer up a decent dividend as well, boosting their total cash return to shareholders.

4). Most of these buyback programs represent a meaningful amount of the current share count. (Both VMware, Inc. (NYSE:VMW) and Emerson Electric Co. (NYSE:EMR) buyback programs are not really meaningful as they are only likely large enough to offset stock option grants).

5). Most of these stocks are near their 52-week highs, extending the theme of the current era that companies no longer wait for their stock to fall out of bed before buying back stock. Nor do any of these stocks trade below tangible book value, which also had historically served as a key litmus test of buyback efficacy.

Still, the longer-term buyback programs for some of these firms have surely been impressive. Take toy maker Hasbro, Inc. (NASDAQ:HAS) as an example. The company’s new $500 million share buyback (which would reduce the share count by 11% at current prices) is reasonably impressive — until you look at what Hasbro, Inc. (NASDAQ:HAS) has already been doing for nearly a decade.

Hasbro’s Shrinking Share Count (millions)

By the end of 2013, Hasbro, Inc. (NASDAQ:HAS)’s share count will likely have fallen by 37% since 2005. And chances are, Hasbro will simply announce another buyback when this current plan is done.

On a related note, buybacks should also be seen as a key pillar of corporate staying power. As I noted in early 2012, investors were overlooking Hasbro, Inc. (NASDAQ:HAS)’s deep history and strong roster of brands, assigning the company a market value half as large as games maker Zynga Inc (NASDAQ:ZNGA) market value.

Common sense has returned, and Hasbro, Inc. (NASDAQ:HAS) now sports a much larger market value than Zynga Inc (NASDAQ:ZNGA). Remember that the next time you see an unproven company quickly leapfrog past a proven competitor like that. Reality eventually sets in.

Auto parts maker Visteon Corp (NYSE:VC) clearly embodies the new thinking about share buybacks. The company announced plans last month to sell its $1.5 billion stake in a joint venture with a Chinese partner. Visteon Corp (NYSE:VC) could have looked to pay down debt or make an acquisition, or simply keep the ($1.2 billion after-tax) proceeds. Instead, almost all of the money will go toward a share buyback that might reduce shares outstanding by 25%.

Page 1 of 2
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

Most Expensive Animals in the World

Most Expensive Specialty Crops in the World

Movies That Took Ages to Make

The Longest Hollywood Films Ever Made

Most Expensive Concert Stages

The Richest Bands of all Time

10 Most Corrupt Countries 2013 List

10 Countries with the Highest Quality of Life Index

Most Expensive Mattresses in the World

5 Smallest Countries by Land Area

The Ultimate Heartbreak Songs

Richest Teenagers in the World

10 Most Haunted Places in America

10 Best Places to Retire in Florida East Coast

Top 10 Places to See Before You Die

Top 8 Countries in the World Where Justice Prevails

10 Richest States in America

15 Wealthiest Countries in the World

Richest Singers in the World

Most Expensive Tasting Menu in New York City

Most Expensive Baby Items in the World

Most Expensive Hotel Suites in Vegas

Most Expensive Brunch in New York City

Most Expensive Beef Cuts in the World

25 Best Colleges to Get a Job

Top 10 US Supermarkets

The 25 Most Dangerous Cities in the World to Visit

Most Expensive Xbox Games

Top 11 Cities Where Billionaires Live

Top 10 Most Charitable Companies in America

Most Expensive Seafood in the World

The 10 Wildest Conspiracy Theories

The 10 Best Job Markets in the US

Top 10 Accounting Scandals of All Time

The 25 Biggest Cities in the World

Top 10 Best Paying Virtual Jobs

Most Expensive Leather Shoes in the World

Top 6 Things to Buy in March

The 10 Most Stressful Jobs in America – 2014 List

Top 10 Jobs for Introverted People

Top 10 Honeymoon Destinations in the World

Top 10 Highest Paying Jobs in the World

Most Expensive Day-Care in New York City

The 10 Cheapest Places to Retire Abroad

Top 10 Most Expensive Luxury Cars in the World – 2014

Killer Small Business Ideas

The 50 Best Personal Finance Blogs

Most Expensive Apartments in New York City

Bloodiest UFC Fights Ever Fought

Most Expensive Rum Brands in the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!