With Buybacks, J&J, Abbott, and Pfizer All See the Same Thing: Cheap Stock

Abbott Labs announced a $5 billion stock buyback plan Monday. Such plans are often used by companies seeking to prop up stock that’s down for a good reason, i.e. the company sucks. But in a market like this one, where everyone is down at bizarre lows, suddenly those buybacks look like cash-generating plans.

What makes pharma different from other industries is that many of the larger companies are sitting on assets akin to something you’d see at a bank. Now Abbott is throwing $5 billion at its own stock, which is down from $59-something to $54-something since September. With the market in a funk, the company is betting that it’s simply getting a piece of itself on the cheap, and is likely to go up as soon as this credit thing works its way out.

Johnson & Johnson, which has its Q4 earings call Tuesday, has put $6.6 billion into its own stock in the last year.

Pfizer has a similar ongoing plan, worth $5 billion.

There are, of course, companies trying to do the opposite — pay top dollar for stock in a down market that, on its own, was not worth it. One example, King Pharma, is sticking to its guns with its $37 a share tender offer for AlPharma stock. The stock traded at just under that level after the offer was made but is now down in the $33-something area since the crash. That makes King’s extended offer look a lot more juicy — AlPharma holders are among the few investors right now who can see part of their portfolios go up