• The First Cut
  • Attractively Priced Share Buyback Stocks

    by John Bajkowski

    Attractively Priced Share Buyback Stocks Splash image

    Corporate managers and directors are responsible for investing a firm’s capital to maximize shareholder value. Companies with excess cash flow need to determine if it’s best used to fund new projects, reduce debt, or return capital to shareholders through dividends or the repurchase of stock (also known as a share buyback). Share buybacks were not common until the early 1980s, but have quickly become widespread. 

    Most companies buy back shares by establishing an open market share repurchase program. However, these plans do not obligate a company, and many companies fail to fulfill the repurchase plan completely.

    Buybacks benefit stockholders in a number of ways. By decreasing the number of shares outstanding, the earnings per share increase for a given level of income. Shareholders are not subject to the taxes that might be incurred if the company had paid the same money out as cash dividends. Additionally, buyback companies provide shareholders with a margin of support by stepping in and buying shares. Studies have shown that companies repurchasing their shares have subsequently outperformed their benchmarks. The excess return was even stronger for value firms.

    For this issue’s First Cut, we turned to the Share BuyBack Achievers Index as our starting point. This index consists of domestic, exchange-listed companies that have repurchased 5% or more of their outstanding shares for the trailing 12 months. The PowerShares Buyback Achiever Portfolio (PKW) exchange-traded fund follows this index. We screened the index looking for stocks that have a price-to-book-value ratio less than the median value for all stocks. Of these, the 30 stocks with the greatest decline in shares outstanding over the last year made the First Cut. In the table, the dividend yield points to firm’s paying out cash dividends as well as repurchasing shares. The ratio of total liabilities to total assets indicates the firm’s financial structure, while the price change highlights recent stock price performance.

    Company (Exchange: Ticker) Annual
    Change
    in No.
    Shares
    (%)
    Shares Outstanding Price-
    to-
    Book-
    Value
    (X)
    Div
    Yield
    (%)
    Total
    Liab
    to
    Assets
    (%)
    52-Wk
    Price
    Change
    (%)
    Share
    Price
    (10/16)
    ($)
     
    Latest
    Qtr
    (Mil)
    Year
    Ago
    (Mil)
    Two
    Years
    Ago
    (Mil)
    Three
    Years
    Ago
    (Mil)
     
     
     
    Description
    Mirant Corporation (N: MIR) -27.86 145.00 201.00 252.00 285.00 0.55 0.0 62.7 4 16.28 electric company
    Zale Corporation (N: ZLC) -23.09 31.97 41.57 48.69 48.81 0.50 0.0 62.7 -54 7.63 fine jewelry retailer
    DSP Group, Inc. (M: DSPG) -19.82 22.73 28.35 29.50 29.34 1.02 0.0 28.8 -3 6.94 semiconductors
    Infinity Property and Casualty (M: IPCC) -15.48 13.63 16.13 18.39 20.30 1.03 1.1 68.0 4 42.48 holding co for auto insurance
    Vital Images, Inc. (M: VTAL) -15.09 14.29 16.83 16.97 13.46 1.22 0.0 14.9 1 12.49 medical digital images
    FPIC Insurance Group, Inc. (M: FPIC) -14.76 7.40 8.68 9.42 10.28 1.02 0.0 72.6 -25 36.95 medical insurance
    Loews Corporation (N: L) -14.38 435.07 508.16 534.79 552.68 1.04 0.7 79.0 10 35.89 oil & gas; insurance; hotels
    American Physicians Capital (M: ACAP) -14.36 11.11 12.97 14.60 16.02 1.39 1.1 75.3 -4 30.02 medical insurance holding co
    Overseas Shipholding Grp. (N: OSG) -12.26 26.86 30.62 34.14 39.52 0.64 3.9 51.9 5 44.88 bulk shipping fleet
    Kadant Inc. (N: KAI) -10.49 12.27 13.70 14.12 13.82 0.88 0.0 37.7 -10 13.70 paper-making equip
    Penn National Gaming (M: PENN) -9.89 78.00 86.56 85.58 84.23 0.94 0.0 58.5 74 26.08 gambling properties
    Odyssey Re Holdings Corp. (N: ORH) -9.11 58.93 64.83 70.44 68.98 1.22 0.5 69.1 77 64.92 reinsurance underwriter
    Marchex, Inc. (M: MCHX) -8.89 33.33 36.58 38.94 38.26 1.19 1.6 8.6 -33 5.10 local search & ad company
    Molina Healthcare, Inc. (N: MOH) -7.89 25.79 28.00 28.28 27.97 0.93 0.0 55.6 -23 19.24 healthcare services
    Aetna Inc. (N: AET) -7.87 442.80 480.60 509.20 546.20 1.26 0.2 75.9 -17 25.22 healthcare benefit company
    PCTEL, Inc. (M: PCTI) -7.72 17.62 19.09 20.90 20.81 0.90 0.0 5.4 -21 6.32 antennas for broadband
    M & F Worldwide Corp. (N: MFW) -7.66 19.30 20.90 21.00 19.90 0.97 0.0 87.4 -15 23.48 financial data mgmt
    Sears Holdings Corp. (M: SHLD) -7.53 119.10 128.80 144.70 155.60 0.90 0.0 64.0 15 70.08 broadline retailer
    Torchmark Corporation (N: TMK) -7.52 82.73 89.46 94.32 99.73 1.42 1.2 82.2 15 45.15 insurance holding co
    WellPoint, Inc. (N: WLP) -7.16 482.50 519.70 593.40 627.90 1.00 0.0 54.9 16 46.16 health benefits co
    Seacor Holdings, Inc. (N: CKH) -7.11 19.84 21.36 23.55 24.63 1.04 0.0 50.8 57 90.87 marine transport servs
    Universal Corporation (N: UVV) -7.11 24.99 26.90 27.26 25.94 1.29 4.1 52.3 10 44.59 unitary thrift holding co
    Electronics For Imaging (M: EFII) -7.00 49.11 52.81 56.68 56.56 1.01 0.0 19.1 22 12.24 printers & print mgmt solutions
    Cogo Group, Inc. (M: COGO) -6.93 36.33 39.04 36.97 32.20 1.13 0.0 21.9 36 6.69 technology solutions
    Hackett Group, Inc., The (M: HCKT) -6.79 37.89 40.66 44.13 44.65 1.27 0.0 21.0 -21 3.25 business consulting servs
    U.S. Concrete, Inc. (M: RMIX) -6.74 36.10 38.71 38.23 36.85 1.13 0.0 88.3 -31 1.80 ready-mixed concrete
    CDI Corp. (N: CDI) -6.66 18.93 20.29 20.21 19.94 0.88 3.8 23.9 0 13.76 engineer & IT outsource sols
    CSS Industries, Inc. (N: CSS) -6.34 9.61 10.26 10.73 10.62 0.79 2.9 28.3 -3 20.83 gift cards & wrap; decorations
    Assisted Living Concepts (N: ALC) -6.31 11.81 12.60 13.63 13.87 0.99 0.0 43.0 7 22.50 assisted-living homes
    Silicon Storage Tech. (M: SSTI) -5.94 95.75 101.79 104.13 103.36 0.92 0.0 15.2 -28 2.31 flash memory semiconductors

     

    John Bajkowski is president of AAII.


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