Buyback Bets

10/22/2004 12:00 am EST

Focus:

David Fried

Editor, The Buyback Letter

David Fried is the only advisor to focus solely on corporate buybacks in his search for top-performing stocks. His Buyback Premium Portfolio is up 97% since inception in August 2000 vs. a 22% decline in the S&P 500 over the same time frame. Here are some of his latest ideas.

"Bank of Hawaii (BOH NYSE), founded in 1897, is a regional financial services company serving businesses, consumers and governments in Hawaii, American Samoa, and the West Pacific. Total assets were $9.7 billion as of June 30, 2004. The company recently completed a successful three-year plan to improve operating performance and profitability. Net income rose from $1.48 per share in 2000 to $2.21 per share in 2003. During the past several years, the bank measurably improved customer service levels, and saw its share price climb from a nine-year low of $11.25 to $48. BOH has a robust buyback program. During the second quarter of 2004, Bank of Hawaii repurchased 2.1 million shares of common stock at a total cost of $92.9 at an average cost $43.91 per share. Bank of Hawaii has repurchased 10.7% of its outstanding shares over the past 12-months and has increased the authorization under the share repurchase program by an additional $100 million.

"Masco Corp. (MAS NYSE) is among the largest manufacturers in North America of brand-name consumer products designed for the home improvement and new construction markets. MAS employs some 61,000 people and, in 2003, had worldwide sales of more than $10.9 billion. It’s a sure bet you will recognize these brand names, either because you have them in your own home, or considered them during a remodel or rehab project., such as Kraftmaid, Merillat, and Mill's Pride cabinets, Delta and Peerless plumbing, Hot Springs and Caldera spas and Milgard windows and patio doors. For the six months ended 6/30/04, revenues rose 18% and net income from continuing operations rose 42%. In 2003, the company returned in excess of $1 billion to shareholders through share repurchases (35 million shares) and dividends. In the first six months of 2004, Masco has returned more than $800 million to shareholders through share repurchases (24 million shares) and dividends. Shares outstanding have decreased by 7.8% over the past 12-months.

"Diageo plc (DEO NYSE) is a beverage alcohol business with a portfolio of international brands, among them nine of the top 20 premium distilled spirits brands. Diageo was formed by the merger of Grand Metropolitan Public Limited Company and Guinness PLC. Even if you don’t imbibe, you will be familiar with the wide range of distilled spirits brands it produces and distributes, including Smirnoff, Johnnie Walker, J&B, Guinness, Baileys, Captain Morgan, Tanqueray, Gordon’s, and Jose Cuervo. The list of brands goes on and on. North America is the company's most important market, contributing some 35% of operating profit, with Great Britain the second most important market. Ireland is also a major market and home to two of its eight global priority brands -- Guinness and Baileys. Diego has decreased its outstanding shares by 10.4% over the past 12-months."

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