Insider Purchases & Buybacks: IBM

When a company aggressively buys back its shares over an extended period of time, it is generally a good sign for its future prospects. That thinking may apply to International Business Machines (IBM - commentary - Cramer's Take), which has announced another major buyback plan. (On Stockpickr, you can see the rest of the insider trades and buybacks).

IBM's board has approved the repurchase of shares worth $15 billion, which represents about 10% of the company's market value. The tech giant has about $400 million remaining under its previous plan and intends to use cash from operations for the repurchase.

IBM has been continuously buying back shares, which indicates that it sees value here. It has spent $94 billion to repurchase 1.4 billion shares since 1995 and is looking at spending $12 billion of its authorized funds this year. Kim Caughey, senior equity analyst at Fort Pitt Capital Management, said, "(The buyback plan) implies they're going to have some serious cash generation."

Despite the slowdown in the U.S., IBM has managed to grow on the back of its overseas operations and acquisitions. The company's net income jumped 12% to $3.95 billion, or $2.80 a share, in the fourth quarter, beating Wall Street expectations. Sales climbed 10% to $28.9 billion. It has been aggressively buying software companies over the past seven years, spending over $15 billion. In January, Cognos was acquired for $4.9 billion. IBM has turned toward emerging markets like China and India to propel its growth. And in December, the company said it will spend $1.6 billion on sales in these markets through 2010.

IBM has raised its earnings guidance for 2008 to between $8.25 and $8.30 from its earlier forecast of between $8.20 and $8.30. The latest forecast is higher than what Wall Street was projecting.

There are several investment funds that own IBM, and you can glance at a list of them at Stockpickr.

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At the time of publication, Raznick had no positions in the stocks mentioned, although positions may change at any time.

Jason Raznick is president of Easy Stock Alerts and has been involved with the capital markets for several years. He has worked for Merrill Lynch, Dynamis and Tricap Holdings, a joint venture with Fortress Investment Group. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Raznick appreciates your feedback; click here to send him an email.