Companies are in the business of making cash profit. After they accumulate a pile of cash, there are a number of ways to use it (legally): plowing-back in the business, paying out as dividend, and/or buying back shares. In reality, managers have a lot of discretion in the timing of these actions, not necessarily achieving the optimal timing.
It seems company buyback is back to fashion. On March 15th, PepsiCo announced it would buy $15 billion of its shares by June 2013, including $4.4 billion this year. Even before Pepsi’s announcement, buy-backs unveiled this year had already reached $65 billion, nearly half of 2009’s total of $137 billion, according to Citigroup. Companies, as a group were much more active in buying back their shares in 2006 and 2007, when the market were much higher.
Company buying back its shares alone is not a sufficient reason for you to follow suit. Like in a puzzle, each piece alone is not a solution, it only contributes to the solution. In Gurufocus’s arsenal, we have quite a few pieces that contribute to the your investment decision puzzle: we have information on whether Investment Gurus are purchasing a stock, whether company insiders are purchasing a stock, and whether a company is purchasing its own stocks.
We actually have a tool that enable one to screen for stocks that possess these three pieces of the puzzle together. It is called Triple Buy. A year ago, the tool hardly yielded any results; today, we see plenty of companies that have seen buying activities from Investment Guru, Company Insiders, and Company Buyback.
Because the tool is premium member feature. In fairness to people who paid for the service, I only include a sub-list of the complete result, No .11 to 15 of the comprehensive list.
Details of these companies and transactions involved:
Peerless Systems Corp. (PRLS)
Peerless Systems Corporation is a provider of software-based embedded imaging and networking systems to original equipment manufacturers of digital document products. Peerless Systems Corp. has a market cap of $43.8 million; its shares were traded at around $2.74 with a P/E ratio of 5.5 and P/S ratio of 4.2.
John Rogers owns 90,780 shares as of 12/31/2009, which accounts for less than 0.01% of the $4.91 billion portfolio of ARIEL CAPITAL MANAGEMENT LLC.
Company Insider, Director A. Hammer Jeffrey bought 10,000 shares of PRLS stock on 10/14/2009 at the average price of 2.35, the price of the stock has increased by 16.6% since.
Company’s shares outstanding have shrunk from 17.46 million shares to 16.39 million shares from 2008 to 2009.
MORGANS HOTEL GROUP CO. (NASDAQ:MHGC)
MORGANS HOTEL GROUP CO. operates and owns, or has an ownership interest in, Morgans, Royalton and Hudson in New York, Delano and The Shore Club in Miami, Mondrian in Los Angeles and Scottsdale, Clift in San Francisco, and Sanderson and St Martins Lane in London. Morgans Hotel Group Co. has a market cap of $170.6 million; its shares were traded at around $5.7 with and P/S ratio of 0.7.
Jean-Marie Eveillard bought 60,000 shares in the quarter that ended on 12/31/2009.
Company Insider, President Marc Gordon bought 35,000 shares of MHGC stock on 10/29/2009 at the average price of 3.14, Director Edwin L Knetzger Iii bought 50,000 shares of MHGC stock on the same day.
Company’s shares outstanding have shrunk from 34.76 million shares to 29.65 million shares from 2007 to 2009.
HILLENBRAND INC (NYSE:HI)
HILLENBRAND, INC. is the holding company for Batesville Casket Company, in the business of death care industry through the sale of funeral services products, including burial caskets, cremation caskets, containers and urns, selection room display fixturing and other personalization and memorialization products. Hillenbrand Inc has a market cap of $1.38 billion; its shares were traded at around $22.1 with a P/E ratio of 12.9 and P/S ratio of 2.1. The dividend yield of Hillenbrand Inc stocks is 3.4%.
Robert Olstein bought 13,000 shares in the quarter that ended on 12/31/2009.
Company insider Director F Joseph Loughrey bought 5,000 shares of HI stock on 03/03/2010 and Director James A Henderson bought 3,000 shares of HI stock on 02/09/2010.
Company’s shares outstanding have shrunk from 62.43 million shares to 61.89 million shares from 2008 to 2009.
Edgewater Technology Inc. (NASDAQ:EDGW)
Edgewater Technology Inc. is an e-business consulting and systems integration firm that specializes in providing middle-market companies with tailored solutions for today's Internet-centric environment. Edgewater Technology Inc. has a market cap of $36.3 million; its shares were traded at around $2.97 with and P/S ratio of 0.8.
John Rogers owns 45,178 shares as of 12/31/2009.
Company’s Chairman, President and CEO SINGLETON SHIRLEY bought 3,000 shares back in August, 2009.
Company’s shares outstanding have shrunk from 12.39 million shares to 12.19 million shares from 2007 to 2009.
Crown Crafts Inc (NASDAQ:CRWS)
Crown Crafts, Inc. operates, both directly and indirectly through its subsidiaries, in two principal business segments within the textile industry: Adult Home Furnishing and Juvenile Products, and Infant Products. Crown Crafts Inc has a market cap of $31.5 million; its shares were traded at around $3.42 with a P/E ratio of 7.2 and P/S ratio of 0.4. The dividend yield of Crown Crafts Inc stocks is 2.4%.
John Rogers bought 51,705 shares in the quarter that ended on 12/31/2009.
Company insiders, 10% Owner Partners Small Cap Wynnefield bought 3,480 shares on 11/12/2009 and 17,100 shares on 10/13/2009.
Company’s shares outstanding have shrunk from 9.96 million shares to 9.21 million shares from 2007 to 2009.
Somebody else bought a company’s share can never be a necessary or sufficient reason for you to buy a stock. Sometimes though, when a stock falls into a “Triple Buy” category, it makes one wonder: What am I missing? Should I look into the stock further?
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