AOL logoRight now, the hottest stock in the market is AOL, Inc. (NYSE:AOL). This is the first time this headline has been written about the stock since the tech bubble in the late 1999s.

The Associated Press reports that AOL has decided to buy back $400 million worth of common stock by a Dutch auction ( the one where it begins with a high and mighty price which is then lowered to an earthly figure). This offer is valid from today (28th June’ 2012) till August 2nd’ 2012. Stockholders will be able to trade their shares in a range of $27 to $30. This repurchase of stock will include the $40 million that was left from a buyback of $250 million stock that was authorized in August of last year.

This announcement comes in wake of AOL’s plan to distribute the revenues from AOL’s patent auctions to Microsoft. The deal has generated $1.1 billion for AOL. Tim Armstrong, CEO of AOL, was quoted as saying, “Today’s announcement is an important first step in returning 100% of the proceeds from our patent transaction as expediently and tax efficiently as possible, AOL is focused on continued execution and operational improvement.”

Is it a smart move to distribute the profits to shareholders and buy back shares when the company’s stock is traded at a good-looking $28/share? AOL has seen a consistent boost in stock price since the beginning of this year. The company has been on the right track so far with selling patents to Microsoft Corporation (NASDAQ:MSFT) at handsome profits and combating the shareholder activism by Starboard Value while stonewalling attempts at stirring changes in the company’s board of directors .

The company has bought Huffington Post and is focused on increasing its market presence in internet advertising. There are no wrong moves so far and we did see AOL bouncing back from the low $11 share price seen in August 2011, we might see a higher jump from $28 this time.