Time Warner Cable and Comcast both noted in their earnings reports today that they have been buying back their own shares. Time Warner even went one step further and said it was increasing its buyback program this quarter and raising its dividend. Comcast is also in the process of shelling out the cash to takeover half of NBC Universal from GE. These confident companies, whose shares are set to rise today, are the exception to the norm.
So far this year companies are sitting on cash. The number of buyback announcements in January was 24, nearly half the number of announcements in January 2009, according to Dealogic. Last January was another down month for the market with much the same level, if not more, political and economic uncertainty that we have today.
Even more striking is the lack of merger and acquisition activity, according to Gary Kaminsky, former Neuberger Berman managing director and a ‘Fast Money’ contributor. There were $126 billion worth of deals to start 2009, but last month there were only $36 billion, according to Dealogic. “No M&A signals a lack of confidence by corporate executives and that the market is going nowhere,” said Kaminsky, who used to manage upwards of $30 billion for Neuberger.
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One more sign that corporate titans are tightwads: no dividends. Payouts are down 11 percent from January 2009 and a whopping 33 percent from January 2008, according to Standard & Poor’s.
If you’re sitting this market out, one possible trade today would be to look at the companies with the confidence to spend. Media and cable companies such as Time Warner Cable, Comcast and most of all Disney are feeling comfortable that the ad-spending market has finally bottomed and that they are entrenched enough to weather another recession scare, according to Guy Adami, Drakon Capital managing director and a Fast Money trader. Adami recommends buying Disney shares.
It’s not just the cable business that is spending cash in this uncertain environment. Target was one of the rare retailers to announce a resumption of its share repurchase program in January, as well as a focus on remodeling its current stores to take another shot at Wal-Mart. Target shares are up 5 percent this year amid that announcement.
But for everyone else you have to ask this question: If the corner office has no confidence, should you?
With reporting by Prasanna Subramanian
For the best market insight, catch 'Fast Money' each night at 5pm ET on CNBC.
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