Out Fox The $treet

Historical research from Schaeffer’s shows that stocks entering the Nasdaq-100 shouldn’t be bought at that point. Typically the best stock to buy is the one leaving an index such as the Nasdaq-100. In the normal scenario, a company that leaves such a big index has faced a couple of weak years and the exclusion from the list places extra pressure on the stock. In essence, a catalyst that more » Disclosure: No positions mentioned. Please review the disclaimer page for more details. 

This morning Teva Pharma (TEVA) released their financial outlook for 2012. TEVA is the leading generic drug maker in the world and is based in Israel. The numbers were generally in line with expectations and on a fundamental basis appear very appealing. Stock traded at $42 and the company guided to $5.58. Anybody doing simple math can probably conclude that a continue earning that much money and trading at only 7x estimates is cheap. For our Net Payout Yields model though, the fundamental picture such as PE ratio and earnings growth just don't matter. What matters is that TEVA announced a $3B stock buyback and the potential for dividend hikes. As compared to the $5B buyback announcement of Oracle (ORCL) yesterday, the TEVA deal amounts to 8% of the current outstanding stock with company having a $37B market cap. Clearly the TEVA deal is much more attractive, but the key will be whether the money gets spent and how quickly considering the mention of a 3 year time period. The...

Though missing earnings and revenue estimates, Oracle (ORCL) announced an additional $5B stock buyback program. Unfortunately the earnings report lacks details on the Q112 details regarding stock buybacks. Having a model that focuses on Net Payout Yields (NPY), combination of net stock buybacks and dividends, these headlines naturally grab our attention for future additions to the model. Considering ORCL has a roughly $150B market cap, a $5B stock buyback is not likely to make the top of the list. The small dividend doesn't help much either. This isn't that surprising as most of the large tech companies have piles of cash and strong earnings, but most of them like CSCO and MSFT still only have NPY yields in the 5-6% range. The companies are cheap on the payouts or the market caps are too expensive to get top yields. Below is a chart with the NPYs from the last 5 quarters. Note how the net stock buyback has been rather pathetic until the prior quarter:   ...