The number of companies buying back their own stock has surged since slipping to the lowest level in more than a decade in the second quarter of 2009. That trend is likely to accelerate in 2010, which is a bullish sign for both the economy and stock market.
Stock buybacks among companies in the Standard & Poor's 500 Index totaled $34.8 billion in the third quarter of 2009, according to Standard & Poor's Financial Services LLC. That's a 43.8% increase from $24.2 billion spent on share buybacks in the second quarter, which was the smallest amount spent since early 1998.
In spite of the bounce, however, third-quarter share buyback totals represented a 61.2% decline from $89.7 billion in the same period a year ago, and a 79.7% drop from the record $172.0 billion corporations spent in the third quarter of 2007. But for many analysts the turnaround is a major milestone for the economic recovery.
China May be Great, But Don't Ignore Brazil
Hundreds of millions of Chinese citizens are on a collision course with the middle class - but this doesn't mean it's the first market you should consider.
A study from The McKinsey Quarterly supports this well-documented phenomenon, and estimates that it will take two decades before the Chinese nouveau riche reaches its full spending potential.
I'm not about to refute that claim here. But instead, I want to caution you: Don't be blinded by the euphoria over Chinese consumers and overlook an equally compelling opportunity in another emerging market.
Let's head down to Brazil and I'll explain why - along with the best way to profit, of course.