Buybacks May Boost Shares

Happy September. Who's going to be the first to jump back in?

U.S. stock market investors are waiting for one piece of good news to come out of this summer's market rout: stock buybacks.

The good news, as was the case in the October 1987 and October 1997 crashes, comes first not from Washington, but from corporate treasurers. Led by Boeing, they're testing the waters in droves Tuesday.

Boeing says it could buy back up to 15 percent of the aircraft maker's crashing stock. That's 15 percent of 1 billion shares. No one expects Boeing to spend cash to buy back shares that are worth $4.5 billion, at current levels. But it's a nice gesture.

Almost 1,000 publicly traded companies in the U.S. stock market have bought back shares this year, according to Securities Data Co. Potential size: more than $130 billion. No wonder. After the Dow Jones Industrial Average erased its gain for the year and more, CEOs are seeing the value of their stock options evaporate.

One thing company directors do to influence shareholder perception of their actions during periods of market turmoil is to say they will buy back shares. Some follow through with actual buying; others never do.

Advanced Health approved a buyback of as much as 35 percent of its shares. Jewelry maker Zale Corp. said it could buy up to $50 million of its stock.

APAC Teleservices says it will buy back up to 5 percent of its stock. Wausau-Mosinee approved a 10 percent stock buyback. Even the board of directors of battered Computer Learning, a favorite of short-sellers this year, said it would seek to buy back 1 million shares.

Let's see if some of the heavyweights step up to the buyback plate Tuesday. So far this week, drug maker Merck & Co. and restaurant company Wendy's International are on the record saying they are buying their tumbling shares on the floor of the New York Stock Exchange.

CBS MarketWatch chief economist Irwin Kellner says now is not the time for small fry investors to follow corporate treasurers into the U.S. stock market. "Just sit tight and wait," says Kellner. "Remember, September and October tend to be bad months for equities. The Federal Reserve must cut rates; it won't solve international problems, but it will keep the U.S. from being dragged down by falling stocks."

As for those buybacks, Viacom Inc. is in the billion-dollar buyback league this week, along with Boeing.

Last time we went through this severe a tumble, no less than IBM and Intel, within the context of the computer chip maker's previous buyback program, boosted the overall U.S. stock market by buying their own shares. That was last October, and the buybacks were in the billion-dollar league.

On Tuesday? Viagrafix Corp, its shares having lost three-quarters of their value since April, said it would buy back up to $3 million of shares in the open market. Not too impressive, right?

The Nifty 50 American companies may not look as nifty as they did several weeks ag. Still, investors would like to see some of the stalwart stocks of this sticky summer, prominently Dell Computer, Microsoft, Wal-Mart and Cisco Systems, open their wallets and actually do some buying.

Let's just hope treasurers aren't buying those shares on margin.

By Thom Calandra