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5 stock moving buybacks and 2 clunkers

Cramer: Buyback vs buyback?

(Click for video linked to a searchable transcript of this Mad Money segment)

You'd think, across the board, buybacks should move the needle, right? They don't always.

The concept is something Jim Cramer talks about often on "Mad Money."

That is, buybacks shrink the number of shares outstanding, which should theoretically drive an advance. (By the laws of supply and demand, as supply decreases price goes higher.) However, in practice buybacks don't always spark any meaningful gains.

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Case in point: Exxon.

"The company has been buying back stock consistently and yet it has meant very little to share price," Cramer noted. "A year ago Exxon was at $86. Now it is at $93."

The phenomenon is particularly well illustrated by Cisco.

"If you look over the last four years Cisco's bought back almost ten percent of its float. During that same period Cisco's stock has gone down, from $24 to $21," Cramer explained.

In both cases, the buybacks weren't enough to attract buyers.

Conversely, there are companies that have bought back stock and their shares have advanced, significantly.

"Autozone has shrunk its float from 49 million shares to 34 million shares during a 4 year period. How has the stock done? It's gone from $168 to $543," Cramer said.

Buybacks at Disney, Time Warner, CBS and Viacom have also had a significant impact on share price.

The difference, however, is that all these companies also have fundamental catalysts generating tailwinds. For example, in the case of Autozone, people are holding cars longer and visiting Autozone for replacement parts rather than buying a new vehicle. The buyback, therefore, provided added value.

Conversely, in the case of Exxon, investors are looking for growth. Without growth, the buyback doesn't matter much.

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Now make no mistake, Cramer isn't saying buybacks can't move the needle, they can. It's simply that buybacks alone aren't enough to move the needle by themselves; therefore they aren't a reason to buy if a company doesn't have strong fundamentals.

"Look around and you'll find that the market is filled with buybacks that while sounding bullish, have been a gigantic waste of money," Cramer said.

Call Cramer: 1-800-743-CNBC

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