Best Buybacks Bets
06/11/2004 12:00 am EST
David Fried's Buyback Letter is the only service to focus on share buybacks as the foundation of its recommendations. His Premium Portfolio is up 100.72% since inception (August 2, 2000) vs. a 22.04% decline in the S&P 500. Here, he adds three new stocks.
"MGM Mirage (MGG
NYSE) has just made
a surprise $7.65 billion bid to buy rival Mandalay. If the blockbuster deal goes through–and
it will require approval by the SEC and gambling regulators–it would make MGM Mirage
the industry's top gambling company. The merger would allow MGM Mirage to
dominate the Las Vegas Strip, with its portfolio of brands such as Bellagio, MGM
Grand Las Vegas, The Mirage, Treasure Island, and New York-New York. The company
is also a 50% owner of Borgata in Atlantic City. First quarter 2004 adjusted
earnings from continuing operations per diluted share increased to an all-time
record of $0.70, up from $0.38 in the 2003 quarter. In November 2003, the board
of directors approved a new stock repurchase program for up to ten million shares.
This was on top of a similar buyback program approved in February 2003. Over the
past 12 months MGM has decreased its shares outstanding by 6.5%.
"The Ryland Group (RYL
NYSE) is a homebuilder and a mortgage-finance company, which
builds homes primarily for first-time buyers, as well as
for move-up buyers and adults seeking retirement housing. For the first
quarter of 2004, revenues increased 14% to $754.6 million. Net income increased
37% to $52.4 million. Revenues reflect an increase in average closing prices
and closing volume. In January, Ryland announced that it anticipates full
year 2004 earnings will exceed $10 per share, and then in April, raised that
expectation to exceed $11 per share, citing record first-quarter new orders as the
primary reason for its increased outlook. Ryland also has a robust buyback program.
In January 2004 the company announced it would buy as many as 500,000 shares, and
a month later, the board authorized the repurchase of an additional one million shares.
Over the past 12 months Ryland has decreased its shares outstanding by
"Everyone has heard of Sears (S NYSE), and it’s a good bet that you have a personal relationship with the retailer, since Kenmore is the top-selling appliance brand in the US. In fact, one in every two homeowners owns a Kenmore appliance. Other Sears brands include Craftsman, the No. 1 brand of tool, DieHard, and Lands' End. The firm has nearly 900 full-line stores, and through its lending subsidiaries, is also the nation's number one credit provider among retailers, serving more than 60 million households. There are more than 48 million active Sears customer households, and Sears is the largest product repair service provider, with 14 million service calls made annually. In April, Sears announced a positive second-quarter outlook, anticipating earnings per share to be $0.78-$0.83, with earnings for the full year expected to be $3.60-$3.80. Over the past 12 months Sears has decreased its shares outstanding by a whopping 30.7%."