Can a Stock Buyback Fix Wal-Mart’s Low, Low Prices?

Typically, a stock buyback signals corporate executives are bullish. But at Wal-Mart (NYSE:WMT), there is a good chance it is simply another savvy marketing move. This time shareholders are the ones dealing with everyday low prices.

Stock buyback. That is a term you don’t hear too often these days. In a market where credit is tight, investors are cautious and so many companies are diluting their shares with fresh offerings, we rarely hear of a company saying, “Hey, we’ve got extra cash.”

Earlier today, the $200 billion mega-retailer announced it is ready to purchase $15 billion worth of its own stock. With the company’s days of high-flying growth clearly in its past and its stock down by nearly 10% so far in 2009, Wally World’s executives feel its best way to increase shareholder value is to take some of its shares off the street.

It is a signal that Wal-Mart believes its newfound customers (thanks to a gruesome economy) are permanently ditching high-priced competitors and sticking with the cheap, but politically-uncorrect store.

So far today, shares are little-moved on what should be positive news.

The action is an indication that the Street may have another view of Wal-Mart’s future. For the most part, over the last nine months, shares of the company have reacted inversely to the economic downturn.

The worse the news, the higher the layoff figures and the lower its competitors’ sales dropped, the higher Wal-Mart went. Many folks fear as the economy rebounds, the trend will continue. That means shares will continue to lag the markets throughout the year.

The news of the buyback certainly strengthens the bulls’ argument, but the bears will ultimately win. Wal-Mart’s is finding it harder and harder to grow and as the economy eventually rebounds, consumers will be anxious to get back to stores they, well, are proud of.

Frankly, there are too many other good opportunities out there to be worried if Wal-Mart is going to make any magic happen. The “re-flation” trade is becoming a predominant theme, meaning investors need to target the rebound picks, not the firms that made their gains as others dropped.

Any fan of “signaling theory” will tell you today’s news is a surefire message from Wal-Mart’s top brass. But it could easily be little more than a marketing message to try to show off the company’s low, low stock price.

There are better investments than Wal-Mart.