watch now3:0203:02When you want to buy a stock you need an edge, says Jim CramerMad Money with Jim CramerAs buybacks slow across the market, CNBC's Jim Cramer on Tuesday told investors why he thinks generous repurchasing is currently working in some companies' favor, citing a note from Goldman Sachs analyst David Kostin."Kostin has some great news here: while buybacks have slowed, investors continue to reward companies that aggressively purchase their own s," he said.
"And there's your edge. Stocks with bountiful buybacks can do well here, in contrast to those that might not. It's an edge.
It's not foolof, but it's certainly an arrow in your stock-picking quiver."Buybacks are integral to the market because they "drain the excess supply from the system," Cramer said.
For example, if there are a slew of s added to the market through IPOs but not a lot of new money coming along with them, stocks will head lower, he continued.
Buybacks help ease such a supply and demand blem, he said.In a recent note, Kostin wrote that repurchasing by S&P 500 companies was strong during the first half of the year — and even put the index on track for a record year of buybacks.
But this growth has slowed during the second half of the year, he added, saying that many outfits are instead upping their capital expenditure.Kostin also said that some companies with a history of consistent count reduction are outperforming.
He dubbed these names "buyback aristocrats," or stocks that have reduced their counts by at least 1% in at least nine of the past ten years.Cramer suggested Kostin's "buyback aristocrats" tend to outperform when the economy slows.
He pointed to two of his favorites on this list that have been buying back 4% of their count annually — Wells Fargo and Apple.
He indicated that both companies' generous buybacks demonstrate management's confidence.
He also used the iPhone maker's "buyback aristocrat" as another reason he believes investors should own the stock for the long term."You need fortitude to buy stocks and stick with them," Cramer said.
"Apple's buyback helps that fortitude."watch now11:1911:19Jim Cramer sizes up companies that continue to buyback stocksMad Money with Jim CramerJim Cramer's Guide to Click here to download Jim Cramer's Guide to at no cost to help you build long-term wealth and invest smarter.
now for the CNBC to Jim Cramer's every move in the market.Disclaimer The CNBC Charitable Trust owns s of Wells Fargo and Apple.Questions for Cramer?
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