Replies to post #95837 on Biotech Values

[mouton29]

<<Large-Cap Companies Are Overflowing With Cash

[Look for increases in share repurchases and M&A activity.] >>

An increase in M&A activity is clearly good for the targets, but is it good for the large-cap acquirers?

[DewDiligence]

1Q10 Stock Buybacks Increased 80% Year-over-Year

[This is a direct consequence of companies’ large cash balances—see #msg-50230744.]

http://finance.yahoo.com/news/SP-Stock-buybacks-up-80-apf-3406735248.html?x=0

›June 24, 2010

NEW YORK (AP) -- Standard & Poor's said Thursday that stock repurchases among S&P 500 companies surged 80 percent in the first quarter from the same time last year, a sign that more companies feel comfortable enough about the economic recovery to begin cutting their record cash levels.

The jump marks the third straight quarter that companies in the broad S&P 500 index have increased their buyback activity. Repurchases were up 16 percent from the 2009 fourth quarter. Still, the $55.3 billion bought back in the first quarter remains far short of record highs reached before the downturn. Stock buybacks totaled $171.95 billion in the third quarter of 2007.

Stock buyback programs indicate companies have enough cash to take their shares off the market, which increases the value of the remaining shares and per-share earnings results. Buybacks can also reduce the possibility of takeover threats. Continuing into the second quarter, many companies such as Pepsico Inc. and PetSmart Inc. are announcing buybacks in tandem with a boost in quarterly dividend payments to shareholders.

Howard Silverblatt, an S&P analyst, said the buybacks in the latest quarter appear to be aimed at neutralizing employee options in order to prevent earnings dilution. Silverblatt believes S&P 500 companies will continue this strategy, given the hefty cash balances on their books.

In the quarter, S&P said 251 companies participated in stock buyback programs, up from 214 in the fourth quarter and 194 in the year-ago quarter. However, 20 companies accounted for 60 percent of the buyback activity.

The companies with the three highest buyback activity this quarter were IBM Corp. ($4.02 billion), Wal-Mart Stores Inc. ($2.97 billion) and Exxon Mobil ($2.5 billion).

For the fourth quarter in a row, however, none broke into the top 20 largest stock buybacks in history. The smallest on that top 20 list is Procter & Gamble Co. at $6.23 billion in the second quarter of 2006. IBM tops the list with $15.7 billion in the second quarter of 2007.

Information technology companies remained the biggest players, accounting for 29 percent of all buybacks in the first quarter. Consumer staples firms accounted for 19 percent. Telecommunications and utilities companies were the only ones to trim their first-quarter buyback expenditures.‹