By Caroline Humer and Ransdell Pierson

Mon May 20, 2013 2:21pm EDT

(Reuters) – Generic drugmaker Actavis Inc, itself a recent takeover target, said on Monday it would buy specialty pharmaceutical company Warner Chilcott Plc for $5 billion in stock to expand its branded drug portfolio, lower taxes and increase profits.

The Warner Chilcott acquisition brings two new businesses – gastroenterology and dermatology – and adds additional women’s health drugs like branded contraceptives to Actavis, which makes and sells drugs that are no longer under patent protection.

This is the second major purchase in the past two years for Actavis, which competes against larger companies like Teva Pharmaceuticals Industries Ltd and Mylan Inc.

Actavis is following Teva’s path to growth. In recent years, Teva, the largest generic drugmaker in the world, has turned to acquiring specialty branded drugs, which have far higher profit margins than generics, to boost earnings.

Actavis recently rejected a $15 billion, $120 per share takeover offer from Mylan and an approach from Canadian company Valeant Pharmaceuticals International Inc was put on hold, Reuters has reported based on sources familiar with the situation. Analysts have said that buying Warner Chilcott would kill the chances of a takeover of Actavis.

Actavis Chief Executive Officer Paul Bisaro said he would not comment on speculation when asked if Actavis had seriously considered selling itself. In a conference call with analysts, he said the Warner Chilcott purchase was both an expansion and smart tax move.

Mylan would have gotten more out of a deal than Actavis, Morningstar analyst Michael Waterhouse said. Actavis could have given Mylan reach in Eastern Europe and a nice pipeline of products, he said. Waterhouse had some concerns about Warner Chilcott’s pipeline, which faces looming patent expirations.

Actavis shares rose on news of the deal, and were up 1.9 percent in Monday afternoon trading to $127.86, after hitting a new all-time high of $131.18 earlier in the session.

Gabelli Co analyst Kevin Kedra said Actavis seemed to have pursued what they thought was the best deal for shareholders. “I never got the sense their CEO was a maintain control-at-all-odds kind of guy,” Kedra said.

Actavis said the deal would add 30 percent to earnings per share in 2014, in part because it would pay lower taxes when it incorporates in Ireland, where Warner Chilcott is based.

“The longer-term benefit of a lower tax rate is that it allows you to acquire other companies at even better prices,” said BMO Capital Markets analyst David Maris. He said he expected the company to continue with more deals – maybe even bigger ones – after digesting Warner Chilcott.

Maris said Actavis will also likely move to acquire branded products for neurological conditions and allergies from drugmakers in Europe, that have far higher profit margins than generic drugs.

This is the second major acquisition in a year for Actavis. Bisaro, who has been CEO of the company since 2007, helped build Watson Pharmaceuticals into Actavis after it bought the Swiss company late last year and then took its name. Actavis revenues, which were $4.6 billion in 2011, rose to $5.9 billion in 2012 and are expect to hit $11 billion after it buys Warner Chilcott.

$8.5 BILLION WITH DEBT

Warner Chilcott shareholders will receive 0.16 share of the combined company. The companies said that would equate to $20.08 per share, based on Actavis’ closing share price of $125.50 on Friday.

The purchase price is a 34 percent premium to Warner Chilcott’s closing share price of $15.01 on May 9, the day before the companies disclosed that they were in talks. Warner Chilcott shares since rose to close at $19.19 on Friday, narrowing the premium to less than 5 percent. The shares were up 2.2 percent to $19.64 in Monday afternoon trading.

Warner Chilcott turned down offers at higher prices last year, company executives said during the conference call with analysts. But it has since issued special dividends, they said.

Warner Chilcott will have about a 23 percent stake in Actavis after the deal.

The companies said the deal, including debt, was valued at $8.5 billion.

Actavis advisors were Bank of America Merrill Lynch and Greenhill. Warner Chilcott was advised by Deutsche Bank.

(Reporting by Caroline Humer and Ransdell Pierson in New York; Additional reporting by Jessica Toonkel in New York and Esha Dey in Bangalore; Editing by Sriraj Kalluvila, Lisa Von Ahn and Tim Dobbyn)

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Stocks closed slightly lower in lackluster trading Monday as small companies took the spotlight when the the Russell 2000 briefly broke 1,000 for the first time.

Investors seemed much less aggressive after last week’s run to record highs as the major indexes bounced back and forth between small gains and small losses throughout the trading session Monday.

The Dow Jones industrial average fell 19 points, or 0.1%, to 15,335, according to preliminary calculations. The broader Standard Poor’s 500 index fell 1, or 0.1%, to 1,666 and the tech-laden Nasdaq composite index fell 3, or 0.1%, to 3,496.

The Russell 2000. which measures the performance of small-cap U.S. equities, rose 0.1% to 997 after earlier rising as high as 1,002. This milestone reveals the breadth of the market rally over the last week, as even smaller indexes are being pushed to record highs.

Yahoo shares rose 0.6% as the Internet portal made waves Monday, confirming it is acquiring the blogging website Tumblr for $1.1 billion.

JPMorgan Chase shares fell 0.02% as investors await Tuesday’s annual shareholders meeting. Shareholders are set to vote on whether the role of chairman and CEO, currently held by Jamie Dimon, should be split into two jobs.

In European markets, benchmark indexes in Britain and Germany posted modest gains of about 0.5% and 0.7% respectively. France’s CAC 40 rose 0.5%. In Asia trading, Japan’s Nikkei 225 index closed up 1.5% to 15,360.81 and Hong Kong’s Hang Seng index closed up 1.8% to 23,493.03 as the dollar continues to strengthen against the yen and the euro.

The price of crude oil was up about 70 cents to $96.71 per barrel in trading on the New York Mercantile Exchange.

Investors will be watching the Federal Reserve this week for clues about what it plans to do next with its economic stimulus program. On Wednesday Federal Reserve Chairman Ben Bernanke will appear before Congress and the central bank will release minutes of its most recent policy meeting.

The Fed is buying $85 billion of bonds every month to keep long-term interest rates low. That has encouraged investors to put money into stocks instead of bonds.

Policy makers are unlikely to cut back on stimulus just yet since U.S. economic growth is likely to slow in the second quarter, said Scott Wren, a senior equity strategist at Wells Fargo Advisors. As a consequence, Wren said, stocks are likely to continue to rise.

“At some point, we will see some sort of a pullback, but it doesn’t seem like it’s going to be right now,” said Wren. “In the near term we’re probably going to trade a little bit higher.”

Friday, the Dow gained 121.18 points, 0.8%, to close at a record high of 15,354.40. The SP 500 ended up 15.65 points, or 1%, to a record 1,666.12. And the Nasdaq composite index rose 33.72 points, 1%, to 3,498.97.

Contributing: The Associated Press

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Dario Cantatore/NYSE EuronextPaul M. Bisaro is chief executive of Actavis.

The generic drug maker Actavis agreed on Monday to buy Warner Chilcott, a smaller rival, for about $5 billion in stock, in the latest flurry of deal-making in the specialty drug industry.

The merger comes after Actavis’s talks to sell itself to Valeant Pharmaceuticals fell through last month. After the failure of that proposed deal, Actavis turned to its talks with Warner Chilcott while turning down deal entreaties from bigger drug makers like Mylan, according to a person briefed on the matter.

Under the terms of the deal, the company will pay 0.16 of an Actavis share for each Warner Chilcott share. At Friday’s closing prices, that amounts to $20.08 a share, nearly 5 percent higher than Warner Chilcott’s closing price that day. Actavis will also assume Warner Chilcott’s $3.5 billion in long-term debt.

The combined company is expected to have about $11 billion in annual revenue, with focuses on products for women’s health, urology and dermatology. Actavis, itself the product of a merger of Watson Pharmaceuticals of the United States and Actavis of Switzerland, now specializes in generic drugs, including a version of Lipitor.

“We have set as our strategic corporate objective to build a leading global specialty pharmaceutical company,” Paul M. Bisaro, Actavis’s chief executive, said in a statement. “The combination of Actavis and Warner Chilcott creates a strong specialty brand portfolio focused in therapeutic categories with strong growth potential, and is supported by a deep pipeline of development programs.”

The merged company would be based in Ireland, Warner Chilcott’s current home, to take advantage of favorable tax laws in that country.

The deal requires the approval of shareholders in both companies, as well as the sanction of the Irish High Court.

The biggest shareholder of Warner Chilcott is Fidelity Management and Research, the mutual fund company, which held a 10 percent stake as of earlier this month, according to Bloomberg data. Fidelity Management is the second-largest shareholder of Actavis, with a stake of 5.7 percent, the data showed.

Actavis was advised by Bank of America Merrill Lynch and Greenhill Company, while Warner Chilcott was advised by Deutsche Bank.

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Britain’s FTSE 100 rose 0.7 percent to 6,735.31. Germany’s DAX gained 0.5 percent to 8,440.38. France’s CAC-40 advanced 0.3 percent to 4,012.55. Wall Street looked set for a flat opening, however. Dow Jones industrial futures were nearly unchanged at 15,316. SP 500 futures were flat at 1,663.10.

Asian stock markets were broadly higher. Japan’s Nikkei 225 index jumped 1.5 percent to 15,360.81. Hong Kong’s Hang Seng surged 1.8 percent to 23,493.03. Australia’s SP/ASX 200 advanced 0.5 percent to 5,209. Benchmarks in mainland China, Taiwan, and Indonesia also rose. South Korea’s Kospi fell 0.2 percent to 1,982.43.

Investors will have a slew of data to sift through this week, including U.S. homes sales and durable goods orders. Analysts are somewhat pessimistic about the strength of China’s recovery but are expecting to see solid improvement in the U.S.

In Washington, remarks by Federal Reserve Chairman Ben Bernanke to members of Congress on Wednesday will be closely examined for hints about the future direction of the central bank’s monetary policy.

The Fed is currently conducting the third round of massive bond purchases known as quantitative easing to help drive down interest rates and spur lending. But recently improving data on the U.S. economy has led to speculation that the Fed might consider winding the program down earlier than expected.

“What everyone is watching for is any comment from the Fed chief on asset purchases or any clarification on current thinking,” said Mitul Kotecha of Credit Agricole CIB in Hong Kong. “The timing of any decision on winding down asset purchases is still very much undecided so it seems unlikely Bernanke will be categorical or provide strong timing about a reduction” in quantitative easing.

HSBC’s survey on China’s manufacturing growth, to be released Thursday, is also highly anticipated. Analysts at Credit Agricole are expecting a slight deceleration due to seasonal factors, from 50.4 in April to 50.3 in May.

“More signs of weakness will add to global growth worries. I think markets are particularly sensitive to this data release,” Kotecha said.

Wall Street stocks again pushed higher Friday after the Conference Board said its index of leading economic indicators rose 0.6 percent last month after a revised decline of 0.2 percent in March. The index is intended to predict how the economy will be doing in three to six months. Separately, the University of Michigan’s preliminary survey of consumer confidence climbed to 83.7. Economists had predicted that the gauge would climb to 76.8.

Benchmark oil for June delivery was down 57 cents at $95.45 a barrel in electronic trading on the New York Mercantile Exchange.

In currencies, the euro rose to $1.2846 from $1.2829 late Friday in New York. The dollar fell to 102.54 yen from 103.18 yen.

___

Follow Pamela Sampson on Twitter at http://twitter.com/pamelasampson

Copyright 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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The month since Len decided he was ready to leave Maryland after his sophomore season and enter the NBA draft hasn’t gone exactly the way the Ukrainian big man would’ve hoped. Two weeks after his announcement, the 7-foot Len discovered that what he thought was a sprained left ankle — or possibly bone spurs — was a partial stress fracture that required surgery and four to six months of recovery.

Len has heard that his draft stock has either remained unchanged or plummeted to the back end of the lottery because the injury has made him incapable of working out for teams. He probably will be able to walk unassisted around June 27 when Commissioner David Stern will step to a podium at Barclays Center and announce where Len’s NBA career will begin.

Despite the unforeseen setback, Len remains confident in his decision to have surgery — and his future prospects in the NBA.

“I think I have the biggest upside in this draft with the big guys,” said Len, still a few weeks shy of his 20th birthday. “I think, maybe 10 years from now, I’ll be the best player out of this draft.”

In a draft that NBA scouts and talent evaluators believe is fairly weak and short on immediate impact players, no consensus No. 1 overall choice has emerged, though Kentucky freshman center Nerlens Noel is the favorite despite the fact he had surgery to repair a torn anterior cruciate ligament last March and estimates that he won’t be ready to play until around Christmas. If the 6-11 Noel goes first, he would be the third Kentucky player to go No. 1 in the past four years — joining Washington Wizards point guard John Wall and big man Anthony Davis of New Orleans.

“I’m not surprised,” said Noel, 19, adding that he is ahead of schedule. “I have a God-given talent and I’m going to use it the best way I can. It would mean a lot to me. Definitely a dream come true if I get the opportunity.”

The Wizards have the eighth-best odds — a 3.5 percent chance — at winning Tuesday’s NBA draft lottery and will be looking to bolster their front line or add another perimeter scorer. They met with 15 players last week in Chicago, including Len, Indiana forward Cody Zeller, Gonzaga center Kelly Olynyk, Pittsburgh center Steven Adams, Duke center Mason Plumlee, Georgetown forward Otto Porter Jr., Ohio State forward Desean Thomas, Indiana swingman Victor Oladipo, UCLA forward Shabazz Muhammad, California guard Allen Crabbe, Lehigh guard C.J. McCollum and Murray State guard Isaiah Canaan.

Noel and Kansas guard Ben McLemore, another contender to go first overall, did not meet with Washington. UNLV forward Anthony Bennett, considered a top-five choice, did not attend the combine after having surgery to repair a torn rotator cuff in his left shoulder.

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It’s the narcissist rally.

Sure, there are plenty of forces pushing stocks higher — record corporate earnings, small investors finally buying again, signs the U.S. economy may be strengthening, central banks flooding the financial system with money.

But you may want to spare a thought, and a healthy dose of worry, for what is one of the biggest, and least appreciated, reasons for the rally: buybacks.

Flush with cash and a world of opportunity at their doorstep, companies have decided there’s nothing more attractive than themselves. So, they’re offering big money to buy back their own stock. This year, big U.S. companies have given the go-ahead for $286 billion of buybacks, up 88 percent from the same period last year, according to Birinyi Associates, a market research firm. If the pace continues for the rest of the year, the tally will exceed the record set in 2007.

Every manner of company is caught up in the buying binge, including home-improvement chains, makers of farm equipment and jet engines, airlines, sellers of soft drinks and of hard liquor alike. Not one to miss a hot trend, Apple recently authorized as much as $50 billion of buybacks.

Investors like buybacks because they suggest companies think their stock is cheap. They also help reduce the number of shares outstanding, which automatically increases earnings per share. And higher earnings per share often, though not always, lead to rising stock prices.

But buybacks are also crucial to the rally for a reason that’s not widely known. Companies are one of the few big stock purchasers nowadays. Nearly every other big player in the stock market has been selling more than they’ve been buying.

Pension funds have been selling. Local and state governments have been selling. Investment brokerages have been selling. And, yes, until recently, even Main Street investors.

You can see this in the data released by the Federal Reserve each quarter, and it’s a sea of red — save for corporate buying, that is, buybacks plus purchases of other companies. In total, U.S. companies, not counting banks and other financial firms, have bought more than $1 trillion of stock in the five years through 2012, net of stocks they’ve issued.

Experts note that companies may not spend all the money they have authorized on buybacks. But with investors clamoring for companies to return cash to them, either in dividends or buybacks, the odds are high that many will.

However much they spend, each dollar of buybacks appears to be having a greater effect on raising the prices of certain stocks. That’s because fewer shares are changing hands each day. On Wall Street, it’s referred to as a “drying up” of liquidity. And like in any market, a purchase or sale when fewer people are trading can push prices up and down much more.

DirecTV bought $1.4 billion of its own shares in the first quarter, or 7.8 percent of all trades in the company’s stock, according to data from Birinyi Associates. DirecTV rose 12.8 percent in the same period, two points more than the Standard and Poor’s 500. IBM bought $2.6 billion of its shares in the first quarter, or 5.6 percent of what was traded. It rose 11.8 percent.

Stocks move up for all sorts of reasons, so the exact impact on prices of individual stocks when companies buy their shares is unclear. In any event, the total amount of buybacks doesn’t appear to be enough to have a big effect on the whole market. If companies in the SP 500 follow through on their plans this year, the buybacks will amount to just 1 percent of total trading, estimates Robert Leiphart, an analyst at Birinyi.

Still, companies that do buy back their own stock are seeing prices soar, and almost immediately.

On Friday, Northrup Grumman jumped 4 percent after announcing it had authorized $4 billion of buybacks. The military contractor said it expects buybacks will cut its shares outstanding by 25 percent by the end of 2015.

Another big share buyer, Home Depot, rose 5.7 percent on Feb. 26 after it announced a $17 billion buyback program. The SP 500 rose 0.6 percent that day. If the retailer spends all the authorized in its plan, it will remove 18 percent of the shares outstanding at current prices, which will make the impact of a next round of purchases even more powerful.

Stocks of companies that have authorized the 10 biggest buybacks so far this year have risen 2.2 points more than the SP 500 in the week after their announcements, according to Birinyi.

Funds riding the Narcissus trade suggest the lift in prices can last for months, too.

The PowerShares Buyback Achievers and the TrimTabs Float Shrink funds, two exchange-traded funds, are both up 23 percent so far this year. By contrast, the SP 500 is up 17 percent.

Instead of getting excited, though, some on Wall Street are worried.

Gregory Milano, CEO of consultancy Fortuna Advisors, has run studies showing that companies that spend the most on buying back their own stock tend to underperform because they don’t spend enough on opening new factories, research or otherwise building their business for the long term.

Andrew Smithers, who runs a London-based investment consultancy, thinks buybacks have pushed stocks more than 40 percent higher than they’re worth. In his book “The Great Deformation,” former U.S. budget director David Stockman says Corporate America is drunk on buybacks and that they’ve helped push stocks up too far, too.

Another problem is that buybacks can give investors a false sense of strength of the true earnings power of a company. Forty percent of the increase in the earnings per share of SP 500 companies in the past 12 months came from reducing the number of shares through buybacks, estimates Barry Knapp, chief U.S. stock strategist at Barclays Capital.

Even if you’re worried, it’s not clear what you should do in the face of this massive corporate buying, which shows no signs of easing. Howard Silverblatt, senior index analyst at SP Dow Jones Indices, notes that SP 500 companies have plenty of cash to keep buying — a record $1 trillion, not counting money set aside in reserves as required by regulators.

The dilemma facing buyback skeptics who are thinking of selling is the same one facing those worried the rise in the market has come mostly from the Federal Reserve efforts to stimulate the economy. “Don’t fight the Fed,” the old Wall Street saw goes.

To which should perhaps be added, “Don’t buck the buybacks.”

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Beirut, Lebanon – Last month, the leader of Syrian rebel group Jabhat al-Nusra – which has been steadily winning battles and gaining popular support since its inception in January 2012 – was forced to publicly clarify his group’s relationship with al-Qaeda.

In a YouTube video posted on April 10, Abu Mohammed al-Jawlani stated: “The sons of Al-Nusra Front pledge allegiance to Sheikh Ayman al-Zawahiri,” the former right-hand man of Osama bin Laden and the acting head of al-Qaeda.

With this declaration, Jawlani ratcheted up suspicions in the West that significant elements of the Syrian opposition are ideologically and tactically aligned with al-Qaeda. Nusra is now officially considered a “terrorist” organisation by the US State Department.

With fierce fighters, including veterans of battles in Libya, Iraq and Afghanistan apparently among its ranks, Jabhat al-Nusra is considered one of the most effective groups battling the regime of Syrian President Bashar al-Assad.

According to a report by the Quilliam Foundation, the group’s roots can be traced back to the activities of deceased al-Qaeda leader Abu Musab al-Zarqawi during the early 2000s. During a journey from Afghanistan to Iraq to fight US forces, Zarqawi is said to have amassed fighters, sending some to Syria and Lebanon to establish branches of his network; so-called “guesthouses” to train and funnel fighters to Iraq.

When it became clear the Syrian uprising of 2011 would devolve into war, many of these experienced fighters in Iraq came to Syria, the report says, with the goal of overthrowing Assad and establishing an Islamic caliphate in the Levant.

The experience of many Jabhat al-Nusra fighters distinguishes them from the often rag-tag Free Syrian Army cadres they sometimes fight alongside. The Quilliam report concluded that al-Nusra’s leaders “can use their experience as jihadists in other countries to plan, identify goals, and strategise effectively, making them one of the most efficient groups fighting in the revolution”.

Their main tactics are reflective of their training in asymmetric warfare in Iraq – car bombs, suicide missions, and the targeting of security forces. They also engage in more regular military activities, such as the capture of Army Base 111 following a successful siege.

Al-Qaeda fears

Jabhat al-Nusra has been regarded as a bogeyman in the West, and this preoccupation is readily apparent in statements from American policy-makers.

Just one month after Jabhat al-Nusra announced its formation, then-head US diplomat Hillary Clinton cited it and similar groups in Syria as one reason to withhold aid from the Syrian opposition. In a February 2012 interview with CBS, she said, “We know al-Qaeda’s Zawahiri is supporting the opposition in Syria. Are we supporting al-Qaeda in Syria?”

But Syrians, watching a well-disciplined and organised group of fighters gain more and more ground against the Assad regime, are increasingly throwing their support behind Jabhat al-Nusra – in spite of its Islamist ideology, several Syrian activists and commentators say.

Support – or at least resigned acceptance – comes from many sides, some unexpected. Noor, a cosmopolitan young Syrian activist based in Turkey, said she’s “not threatened by [al-Nusra] or their approach,” as long as they continue to win battles against the regime.

Similarly, Ahmed Quseir, spokesman of the Homs branch of the General Authority of the Syrian Revolution, a network of opposition activists in Syria, says the Salafist leanings of al-Nusra “do not pose any risk” to the “freedom of Syrians”, or the “type of power” that will emerge in Syria after the war.

In contrast, Abdelbaset Sieda, president of the Syrian National Council, emphasises that al-Nusra’s radical ideology – a word he enunciates like an expletive – is “unacceptable” to Syria’s “moderate social environment”, which thrives on diversity, rather than narrow and literal interpretations of Islamic scripture.

‘I do not have another choice’

Moderate Syrians’ acceptance of Jabhat al-Nusra can be attributed to two main factors. First, they have all but given up hope of meaningful help coming from the West. Abdullah Alshamy, a member of the opposition affiliated with the Douma Revolution group as well as the Islamist Al-Faruq Brigades, said via Skype that given the increasingly dire situation Syrians find themselves in, “no one says no to help of any kind, whether it comes from al-Nusra or from America”.

“Al-Nusra is just a group of people helping us against the Assad regime … I do not have another choice” but to support them, Alshamy said.

Ma’moun Halal, an opposition member working with the Shahba Press Agency based in Aleppo, went further. “Jabhat al-Nusra fought Assad’s regime at a time when the US and the West were saluting Bashar despite the massacres.”

Between the massacres, the scorched earth, and the food and petrol shortages, Syrians seem ready to throw their support behind any group that can protect them and provide basic provisions.

Sieda, the Syrian National Council head, echoes these sentiments. In a phone conversation, Sieda emphasised the “brutality of the regime, which is using all kinds of weapons, and the indifference of the international community” as leading to “despair” that has driven average Syrians into the weapons-laden and wealthy arms of al-Nusra.

He predicted that with “collaboration” – the exact nature of which he could not specify – “many fighters would leave Jabhat al-Nusra and join the united army troops”.

But it seems that Syrians are attracted to al-Nusra as more than a last resort. Activist sources cite al-Nusra’s army-like discipline and an ethical code that seeks to protect the people, rather than exploit them, as has been the case with some other Free Syrian Army brigades. Halal speaks of the “vandalism and robbery” perpetrated by FSA fighters, not to mention the more sinister spoils of war that observers have heard whispers of.

Journalist Eli Kamisher relayed an anecdote told to him by a man in Kfranabel. “When Jabhat al-Nusra enter a village, all the thieves and rapists run away.”

But Jawlani’s declaration of allegiance to Zawahiri strikes even opposition figures sympathetic to al-Nusra as strange.  ”The relationship [between the two] is not accepted here, and they know that,” Alshamy says.

But apart from grumblings, analyst Aaron Zelin believes that Jawlani’s declaration will have little impact on the situation in Syria in the short term.

He contends that only introductions of Salafist ideology into the lives of moderate Syrians – such as “harsh punishments and narrow interpretations of sharia” – carry the potential to upset the cautious acceptance mainstream Syria has conferred onto al-Nusra.

That is already happening in some areas of Syria. In places such as Mayadin, Raqqa, and Aleppo, people have been lashed or jailed for drinking alcohol, not attending prayers, or mixing with the opposite sex, Zelin says.

When asked what will happen to Jabhat al-Nusra members after the war is over, should the opposition win, Alshamy expresses optimism. “I think some of them will work in Syria under the law of the country, and others will go back to their countries.”

He admits, however, that thinking carefully about the post-Assad future is not high on many people’s agendas. “All that is not important now. Now we should focus on staying alive.”

1415

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NEW YORK — It’s the narcissist rally.

Sure, there are plenty of forces pushing stocks higher — record earnings, small investors buying again, signs the US economy may be strengthening, central banks flooding the financial system with money.

But you may want to spare a thought, and a healthy dose of worry, for what is one of the biggest, and least appreciated, reasons for the rally: buybacks.

Flush with cash and a world of opportunity at their doorstep, companies have decided there’s nothing more attractive than themselves. So, they’re offering big money to buy back their own stock. This year, big US companies have given the go-ahead for $286 billion of buybacks, up 88 percent from the same period last year, according to Birinyi Associates, a research firm. If the pace continues this year, the tally will exceed the record set in 2007.

Investors like buybacks because they suggest companies think their stock is cheap. They also help reduce the number of shares outstanding, which increases earnings per share. And higher earnings per share often, though not always, lead to rising stock prices.

But buybacks are also crucial to the rally for a reason that’s not widely known. Companies are one of the few big stock purchasers now. Nearly every other big player in the market has been selling more than they’ve been buying.

However much they spend, each dollar of buybacks appears to be having a greater effect on raising the prices of certain stocks. That’s because fewer shares are changing hands.

Stocks move up for many reasons, so the exact impact on prices of stocks when companies buy their shares is unclear. In any event, the total amount of buybacks doesn’t appear to be enough to have a big effect on the whole market.

But some on Wall Street are worried.

Gregory Milano, CEO of consultancy Fortuna Advisors, has run studies showing that companies that spend the most on buying back their own stock tend to underperform because they don’t spend enough on opening new factories, research, or otherwise building their business.

Another problem is that buybacks can give investors a false sense of a company’s true earnings power.

The dilemma facing buyback skeptics who are thinking of selling is the same one facing those worried the rise in the market has come mostly from the Federal Reserve efforts to stimulate the economy. ‘‘Don’t fight the Fed,’’ the old Wall Street saw goes.

To which should perhaps be added, ‘‘Don’t buck the buybacks.’’

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Investors are loving Best Buy (NYSE: BBY  ) these days, but can the same be said about its shoppers? Best Buy stock may be one of this year’s biggest winners, but the news isn’t likely to be as upbeat when the struggling consumer-electronics chain reports on Tuesday.

Best Buy stock hit a new high this week, and the shares have more than doubled this year, but don’t be fooled by a pretty stock chart. Best Buy still has some pretty big problems.

Analysts see Best Buy earning $0.25 a share during the fiscal first quarter ending in April, roughly a third of the $0.72 a share it posted a year earlier. Revenue is expected to decline by 8%. This certainly doesn’t seem like a company on the upswing.

Bulls will point to positive comps during its most recent holiday quarter, but Best Buy had to sacrifice plenty to arrive at the meager 0.9% same-store-sales growth. Gross margins contracted slightly, and marketing costs spiked as promotional activity picked up to woo traffic.

Oh, and let’s not make the false assumption that the typical Best Buy store rang up more sales this holiday season than it did last year. There’s a little more to that 0.9% increase than meets the eye, because Best Buy includes its 11% spike in online orders in calculating comps. It’s a sneaky yet legal trick that way too many retailers are doing these days, and the impact was heightened here because Best Buy shuttered 49 of its superstores early last year. In other words, we had fewer stores for these BestBuy.com sales to be misleadingly divided into. Back out the Internet sales contribution, and comps would have been slightly negative.

There’s also that 11% increase in online revenue itself to frame correctly. Amazon.com (NASDAQ: AMZN  ) — Best Buy’s showrooming nemesis — saw its net sales soar 22% during its holiday quarter. Best Buy actually continues to lose ground to the leading online retailer by growing its BestBuy.com sales at half of Amazon’s clip.

Do you fancy a little more doubt in your skepticism casserole? Well, let’s turn to how things will play out through the next few quarters. A few years ago, Best Buy would sell a ton of DVD players, video game consoles, and CD players during the holidays. Then shoppers would flock back to buy new media releases. Well, all of those categories are fading at Best Buy. Smartphones and tablets were the big positive drivers during the holidays. Once you buy any of those and get locked into those digital ecosystems, there’s no need to keep coming back to Best Buy.

Junk food
Tuesday’s report doesn’t have to be a disaster. An improving economy could help mask the downward spiral. However, investors are using a lot of poor judgment this year. RadioShack (NYSE: RSH  ) — which is in worse shape than Best Buy and has made an even bigger bet on mobile retail — has seen its stock nearly double in 2013, even though losses are widening and sales are shrinking.

So ask yourself why these seemingly hopeless consumer-electronics retailers are rallying. They will never return to what they used to be in this age of digital delivery. Performance isn’t really improving. Stock charts may not lie, but they are drawn by investors who sometimes don’t know any better.

Best Buy stock will only break your heart in the end.

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On Tuesday, AutoZone (NYSE: AZO  ) will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they’ll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you’ll be less likely to make an uninformed knee-jerk reaction to news that turns out to be exactly the wrong move.

AutoZone has benefited greatly from the trend among car owners to hang onto their used vehicles longer, accepting the higher maintenance costs involved with keeping older cars running rather than having to face sticker shock from a new-vehicle purchase. As new car sales start to rebound, though, will the auto-parts retailer start to see its business go in the other direction? Let’s take an early look at what’s been happening with AutoZone over the past quarter and what we’re likely to see in its quarterly report.

Stats on AutoZone

Source: Yahoo! Finance.

How will AutoZone’s earnings fare this quarter?
Analysts have very narrowly cut their estimates on AutoZone’s earnings in recent months, with a $0.03 per share reduction in its just-ended quarter and an even smaller $0.02 per share drop for the full 2013 fiscal year. The stock, though, has continued to rise, with an 8% gain since mid-February.

Like many auto-parts retailers, AutoZone has traditionally seen its fortunes linked to the state of the economy, as better economic times lead more car owners to buy new vehicles rather than spending money on replacement parts. With auto sales having rebounded lately, that trend played out in AutoZone’s last quarter, in which the company posted same-store sales declines of 1.8%.

But there are signs that the prospects for AutoZone might be improving. The company blamed delayed tax refunds for part of its challenges last quarter, raising the possibility that anticipated revenue might simply shift into the just-ended quarter. Given AutoZone’s focus on selling to do-it-yourself car owners, its sensitivity to personal financial issues is higher than many of its peers that focus more on the commercial parts market.

Still, competition is looking fiercer than ever. O’Reilly Automotive (NASDAQ: ORLY  ) reported recently that it has expanded its sales to auto-repair professionals, and despite a modest 0.6% jump in same-store sales for the company, it expects better results in the current quarter. Even though AutoZone has better margins, retailers Advance Auto Parts (NYSE: AAP  ) and Pep Boys (NYSE: PBY  ) have each taken steps to implement cost-cutting measures and reduce their overhead in order to bolster their own profitability.

In AutoZone’s report, look for management to explain whether delayed tax refunds turned into better sales for the company this quarter. If the company doesn’t post the improvement that O’Reilly saw, it could be a warning sign that AutoZone’s recent share-price gains could reverse themselves in the near future.

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