This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

Winning Funds Bet on Companies Repurchasing Shares

Nygren looks for unloved companies that are increasing the value of their businesses. Over the years he has often favored dividend payers and companies that are repurchasing shares. He likes such stocks because they have strong cash flows and are using the money to enrich shareholders.

Lately, Nygren has been emphasizing buyback companies and moving away from utilities and other dividend payers. He says that in recent years, income investors have shifted away from low-yielding bonds and moved to utilities. Because utilities have been slow growers, they typically sold at multiples that were about two thirds of the figure for the S&P 500, he says. But now they trade at a premium to benchmark.

"Investors have bid up the prices of dividend stocks, and they have not paid up for many companies that use all their excess cash for share repurchases," he says.

Nygren likes DirecTV (DTV - Get Report), a company that does not pay a dividend. Although the satellite TV company has grown rapidly, the shares sell for less than 10 times earnings estimates for next year.





Since 2006, DirecTV has doubled its sales to about $30 billion and almost doubled profits to $2.6 billion. During the same time, it has about cut in half the number of shares outstanding. The share repurchases have increased the value of the stock, says Nygren. "While the total earnings have doubled, earnings per share have quadrupled," he says.

Another stock he likes is Discovery Communications (DISCA - Get Report), which operates such cable channels as Discovery Channel, Animal Planet and Military Channel. In the past year, the company has repurchased about 10% of its shares, and the earnings have been increasing at a double-digit rate. One of the fastest-growing channels is Investigation Discovery, a true crime specialist.

"This is a great business, but income investors have no interest because there is no dividend," says Nygren.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

Stan Luxenberg is a freelance writer specializing in mutual funds and investing. He was executive editor of Individual Investor magazine.
2 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
DISCA $32.65 0.00%
DTV $88.94 0.00%
PKW $50.03 0.00%
PFM $21.90 0.00%
AAPL $129.09 0.00%

Markets

DOW 18,288.63 +155.93 0.86%
S&P 500 2,117.39 +12.89 0.61%
NASDAQ 5,008.0960 +44.5690 0.90%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs