S&P 500's Top Financial Buybacks

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Includes: BRK.A, BRK.B, GS, V, WFC
by: Profit Fan

Yesterday, the S&P Dow Jones Indices reported that "S&P 500 stock buybacks decreased 4.4% to $99.1 billion during the fourth quarter, off slightly from the $103.7 billion spent on share repurchases during the third quarter of 2012."

While some investors like dividends, I personally prefer buybacks because the government doesn't tax me on them and because they increase my stake in the business.

10th: Goldman Sachs Group (NYSE:GS) $1.524 billion.

14th: Wells Fargo (NYSE:WFC) $1.321 billion.

15th: Visa (NYSE:V) $1.317 billion.

16th: Berkshire Hathaway (NYSE:BRK.A)(NYSE:BRK.B) $1.296 billion.

Below is a fundamental analysis and some highlights on these top 4 Financials:

Goldman Sachs has a market cap of $68.82 billion and currently trades for $147.84 per share. Shares have done well the past year, they are up 65% from their 52 week lows and trade just 6% off of their 52 week high of $158.46. Analysts have a mean target price set at $145.65 per share and a median price target of $147.00 per share.

Positives for Goldman

  • P/E of 10.4, P/B of 1.0 and D/E of 2.4 are all below the industry averages 25.6, 1.1, and 2.8 respectfully.
  • Operating margins of 32.8%, net margins of 21.3% and ROE of 10.7 are all above the industry averages 21%, 4%, and 4.2 respectfully.
  • Last year on revenues of $34.1 billion, Goldman had $21.8 billion in cash from operating activities (63%).
  • Recently, Goldman avoided a large capital payment to Berkshire (also on this list) that would have drained cash and given Berkshire close to 9% of the shares outstanding.

Wells Fargo has a market cap of $195.03 billion and trades for $36.98 per share. Shares are up 8.96% YTD and trade just 3% off their 52 week high of $38.20. Analysts currently have a mean price target of $39.51 and median price target of $39.00 on the shares.

Positives for Wells Fargo

  • P/E of 11.1 and D/E of 0.9 both are below the industry averages 14.3 and 1.2 respectfully.
  • On $86.0 billion of revenues in 2012, WFC generated $58.5 billion in cash from operations (68%).
  • I really like Wells Fargo, more highlights can be found here and here.
  • Wells Fargo has a dividend yield of 2.46% and recently received governmental approval to increase its buybacks and dividend.

Visa has a market cap of $135.5 billion and repurchased $1.317 billion in shares last quarter. Shares are up 11.5% YTD and trade at their 52 week high of $168.66. Analyst have mean target price of $173.94 on the shares with a median price target of $176.00.

Positives for Visa

  • Average revenue growth over the past 3 years of 14.7% is higher than the industry averages 5.5%.
  • On revenues of $10.4 billion, Visa generated $5.0 billion in cash from operations (48%).
  • Visa currently carries a dividend yield of 0.65%.

Berkshire Hathaway has a market cap of $254.52 billion and repurchased $1.296 billion in shares of the 4th quarter of 2012.

Positives for Berkshire

  • P/E of 16.4 and D/E of 0.3 are both below the industry averages 16.7 and 1.0 respectfully.
  • Managed by the Oracle of Omaha himself, Warren Buffett.
  • Average revenue growth over the last three years of 13% is well above the industry averages 4.8%.
  • On $162.463 billion in revenues last year, Berkshire generated $20.9 billion in cash from operating expenses (13%).

Bottom Line

Investors have to like the massive amounts of money these financial are producing and especially more because they are returning a large amount directly to investors. In addition to purchasing shares directly, a more diversified investment can be made by purchasing the following ETF that has all but Visa included as one of its top 10 largest individual holdings:

  • Financial Select Sector SPDR (NYSEARCA:XLF)

Disclosure: I am long WFC, BRK.B. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.