3 Companies Leading the Way With Aggressive Stock Buybacks

Key Points

• Stock buyback announcements are rolling out for a certain group of stocks to give investors new reasons to expect more upside potential.
• Backed by fundamental reasons for each, management is looking at the right tailwinds in these companies.
• Wall Street analysts agree that these stocks have a double-digit upside and institutional investors like them, too.

When companies are deemed cheap by insiders, management, in this case, applies a few simple strategies to the underlying stock so that investors regain confidence and an optimistic view of the name. Consequently, these same decisions help Wall Street analysts get behind the stock and potentially boost its price targets accordingly.

That standard method offers a higher dividend payout so that when compared to the stock price, the yields seem higher and more attractive for capital to flow in. There is one issue with this, though: It’s not the most efficient way to create shareholder value, as dividends are then taxed twice and take away from enterprise value since they are essentially capital leaving the company.

Stock buybacks are a better way to boost investor confidence and create more value at the same time. When management buys back stock, it sends a message to the markets and investors that the stock is considered cheap and expected to go higher soon. Knowing this, investors should be aware that companies like Etsy Inc. NASDAQ: ETSY, Kroger Co. NYSE: KR, and even Marathon Petroleum Co. NYSE: MPC are buying aggressively today.

How Inflation and Trade Trends Are Driving Etsy's Stock Buyback Strategy

Now that analysts at Morgan Stanley have become bearish on the United States dollar, a few repercussions might follow. First, a weaker currency will give foreign buyers additional buying power but also reduce domestic consumer buying power. This is where stocks like Etsy come into play, as they connect buyers and sellers globally.

Its scale and global reach will come in handy when consumers need foreign alternatives to find the products they need in an international trade environment that could be about to shift on currency swings. This is why management is getting ahead of the curb by approving a stock buyback program of just over $1 billion.

Now that the stock trades at 66% of its 52-week high, it makes sense for insiders to start backing the potential new trend to get the company back to its former glory. As bullish as this is, insiders aren’t the only ones willing to make their optimistic outlooks public on Etsy stock. Analysts at Truist Financial now have a $70 a share price target for Etsy and a Buy rating as well.

To meet these targets, the stock would have to stage a rally of up to 19% from where it trades today and still be significantly below its 52-week high. More than that, as of November 2024, institutional investors from Pacer Advisors decided to boost their holdings in Etsy stock by 183.9% to bring their net position to a high of $331 million.

Why Kroger Is Buying Back Stock as Defensive Stocks Regain Appeal

Following the same domestic and global trade trend, backed by Morgan Stanley’s view on the dollar, investors can see how Kroger stock might become attractive in this environment. As part of the consumer staples sector, its defensive and non-cyclical nature could be invaluable to portfolios.

This time, momentum has already favored the stock, as it trades at its 52-week high. However, that didn’t stop management from still approving a $7.5 billion stock buyback program to give investors an idea of where it could be headed in the coming quarters. Wall Street analysts know this, too, and they aren’t afraid of pushing for higher prices.

Particularly those at Wells Fargo, who, as of December 2024, reiterated an Overweight rating for Kroger stock, this time with a price target of up to $73 a share. To prove these new valuations right, the stock would have to rally by as much as 18% from where it trades today, giving investors another double-digit upside option in this list.

Like Etsy, institutions saw enough reasons to start buying the stock alongside management.

State Street boosted its Kroger stock holdings by 16% as of November 2024, netting their position at $1.9 billion, or 4.6% ownership in the company, to give investors another optimistic gauge to consider for their buy cases.

New Business Activity Is Good For Oil and Marathon Petroleum Stock

After contracting for 25 consecutive months, the manufacturing PMI index could see a sharp rebound if Morgan Stanley analysts are right about the dollar's bearish outlook.

As exports are stimulated by the lower dollar, production and transport need to kick up to fulfill these new orders.

And that all need oil to happen, which might be the same view Warren Buffett took when he bought up to 29% of Occidental Petroleum Co. NYSE: OXY or when Marathon Petroleum approved an up to $5 billion stock buyback program.

As oil prices remain at $70 a barrel, energy stocks become attractive buys.

But here’s why Marathon is one of the best buys in the industry.

Wall Street analysts are now projecting up to $7.48 in earnings per share (EPS) for the first quarter of 2025, a growth rate of nearly tenfold unseen anywhere else in the peer group.

From these projections, those at Wells Fargo felt confident enough to boost the stock to $186 a share, calling for a net rally of up to 30% from where the stock trades today.