Fed Chairman Ben Bernanke has warned that the housing slump could pose further problems for the economy in 2008, and Treasury Secretary Hank Paulson has also emphasized his concern about the effect the lagging housing market can have on the economy.
With a murky macroeconomic picture, we need to focus on areas of strength within the market.
Share-buyback programs provide a great indicator of strength.
Often in this column, I have looked for and pointed out excellent value opportunities that feature share buybacks. In announcing a buyback, management shows confidence in the company's future outlook, indicating a belief that the present share prices offer a discount on its true worth. Additionally, buybacks help maintain shareholder value by readily picking up the slack in demand should the markets turn negative.
With that in mind, I would like to take a look at
, a tech stock I last wrote about on
In September, management announced that it would expand its share-buyback program by $5 billion, accounting for nearly 10% of its total market capitalization. This comes on top of the $3.8 billion buyback already under way. Along with the increased buyback, Texas Instruments announced it would also raise its dividend by 25%.
These moves make the chipmaking giant increasingly attractive to investors.
While the company lowered the upper range of its third-quarter guidance in September, the stock price, $34.41 at Tuesday's close, now reflects negativity stemming from the forthcoming earnings report.
As a result, I feel less concerned than I am optimistic about Texas Instruments' looming earnings report on Oct. 22. I believe there is far more room for a surprise to the positive rather than a disappointment at this point in time.
All of this leads to my deep-in-the-money call pick for today. I will place a limit order to buy 10 April 30s (TXNDF) for $5.90 or better.
Now it's accountability time. Every Wednesday is the time to "lay it on the line" as I put on display every single pick from 168 separate columns.
At the time of publication, Dykstra had no positions in stocks mentioned.
Nicknamed 'Nails' for his tough style of play, Lenny is a former Major League Baseball player for the 1986 World Champions, New York Mets and the 1993 National League Champions, Philadelphia Phillies. A three time All-Star as a ballplayer, Lenny now serves as president for several privately held businesses in Southern California. He is the founder of The Players Club; it has been his desire to give back to the sport that gave him early successes in life by teaching athletes how to invest and protect their incomes. He currently manages his own portfolio and writes an investment strategy column for TheStreet.com, and is featured regularly on CNBC and other cable news shows. Lenny was selected as OverTime Magazine's 2006-2007 "Entrepreneur of the Year."