Smart stock repurchasers

[Packer16]

If the markets are going to have limited growth for awhile, one way managers can add value is to repurchase stock (if it is under IV).  From my observation, this is good in theory but many times in practice managment's overpay for shares when the stock is high and when the stock price declines they do not re-purchase.  A few that I have seen that perform smart re-purchase are AM, JRN and WPO.  Do you know of any others?  TIA.

 

Packer

[augustabound]

In googling Singleton I found this article that names Loews as the smartest buyers from the '70 through '08ish.

http://www.bitsofnews.com/content/view/6823/

 

[Liberty]

In googling Singleton I found this article that names Loews as the smartest buyers from the '70 through '08ish.

http://www.bitsofnews.com/content/view/6823/

 

I wonder if it's because they are perennially selling for much lower than book... That would help with timing for sure :)

[marcowelby]

In Canada:

 

OCX

 

Significant decrease in the number of shares for the past 10 years

 

Year                    shares (Millions)

 

2000:                164

 

2001:                162.5

 

2002:                161.1

 

2003:                153.7

 

2004:                140

 

2005:                138.8

 

2006:                133

 

2007:                125

 

2008:                122.5

 

2009                120.3

 

2010                118

 

 

 

GBT.B

 

This company have been highly profitable for those who never sold their shares for the past 10 to 15 years

It is hard to compares the numbers of shares from one year to another because they keep buying back their shares and then splitting the remainder every few years!

[NormR]

If the markets are going to have limited growth for awhile, one way managers can add value is to repurchase stock (if it is under IV).  From my observation, this is good in theory but many times in practice managment's overpay for shares when the stock is high and when the stock price declines they do not re-purchase.  A few that I have seen that perform smart re-purchase are AM, JRN and WPO.  Do you know of any others?  TIA.

 

You're going to have to define smart/IV to get good responses.

 

It seems to me that some of the private equity guys have been smart in taking whole firms private, levering them up to get back their investment, and then selling back into the market. 

[beerbaron]

Methanex has returned lots of money in buybacks.

 

Pre-Paid Legal Services did an incredible job at buybacks before they were taken private.

 

BeerBaron

[alwaysinvert]

Swedish Match: http://www.swedishmatch.com/en/Investors/The-share/Repurchases/

 

Sold the stock two months ago, though. Valuation is not great, but the business sure is.

 

 

[Packer16]

By smart repurchase I mean increasing IV per share.  For example, JRN has had 5% declines in FCF per year and reduced them to less than 1% per year and with their stock so cheap they can keep on doing this.  If you buy overvalued stock, then you dilute FCF/share.  I guess the key metric has the repurchases helped or hurt FCF/share.

 

Packer

[ERICOPOLY]

(Unless you guys are planning to continue to hold the shares after they become overvalued) why do you care if the manager is overpaying for the shares you are selling back to him?  They seem to be working in the best interests of value oriented shareholders who buy cheap and sell dear.

 

[Packer16]

Buying overpriced shares does not indicate very good capital allocation skills.  The intent is to use share repurchased as an indicator of good capital allocation skills.

 

 

Packer

[ERICOPOLY]

Buying overpriced shares does not indicate very good capital allocation skills.  The intent is to use share repurchased as an indicator of good capital allocation skills.

Packer

 

Depends.  They might just be laundering the dividend as a capital gain for tax reasons.

 

In which case, it actually is value enhancing on an after-tax basis.  Buffett wouldn't agree though, as Berkshire pays 5% dividend tax on many of it's holdings vs 35% capital gains tax.

[ourkid8]

I would like to add Philip Morris International (PM) as very shareholder friendly in returning cash in the form of a large dividend and a very large share repurchase program.  Since the March 08' spin-off from Altria until the end of June 11' Philip Morris International spent $18.9B to purchase 378.4 million shares, representing 17.9% of the shares outstanding at that time.  The average price of the stock repurchased was $50/share and at current price of $69.08 represents a 38% RoR on their investment. 

 

PM also pays a very generous dividend of $3.08/share and since retiring 378.4 million shares since the spin-off saves annually $1.1B in dividend payments!

 

This is my largest portfolio holding and I plan to hold this investment for life!  :)

 

Thanks,

 

S

[alwaysinvert]

Buying overpriced shares does not indicate very good capital allocation skills.  The intent is to use share repurchased as an indicator of good capital allocation skills.

 

 

Packer

Shareholders by holding shares implicitly state that the shares are not overpriced. Just because management makes continous repurchases instead of highly opportunistic ones doesn't make it bad capital allocation. For shareholders it's still better than taxable dividends. I'm quite skeptic on repurchases overall, but if companies do them I rather see them do it as an alternative to dividends rather than speculations that the stock is too low. Irregular repurchasing programmes are more often badly timed then well timed, and trying to work out afterwards if they were based on good analysis is subject to considerable hindsight bias.