When insiders buy back stock, investors should pay attention. That's because executives generally don't want to buy their stock unless they think its value will eventually increase. When companies repurchase their stock, that garners my attention, too, because it's often a sign that the board sees value in the shares. With that in mind, here are some companies that have been buying back stock.

IN PICTURES: 9 Ways To Go Bankrupt

On The Buyback Radar Screen

BJ's Wholesale Club (NYSE: BJ) - The Massachusetts-based warehouse club has several things working in its favor. Besides its big and well-known store name, and its popularity during these trying times as cost-conscious consumers buy in bulk, it has met or beat EPS estimates in three of the last four quarters. It also trades at what seems like a reasonable 14 times this year's estimate.

Interestingly, in its fourth quarter release the company said it repurchased 1.7 million shares of BJ's common stock at an average cost of $33.17 per share. Moreover, last week BJ's issued a press release saying that its board upped its share purchase authorization by $200 million. Again, I think the buyback activity is a sign that its board feels the stock is a good value and could move higher. Why else would it ponder doing this in what still is arguably a difficult operating environment?

Other Companies Repurchasing Stock

Cisco Systems (Nasdaq: CSCO) - Cisco has consistently beaten Wall Street expectations over the past four quarters, which is eye catching in this trying operating environment. Also, over the last couple of months estimates for this year and next year have increased nicely, which may catch the eye of institutional investors.

On the repurchase front, the company said in its second quarter earnings release that during Q2 of fiscal 2010, Cisco repurchased 63 million shares of common stock at an average price of $23.96 per share for an aggregate purchase price of $1.5 billion. That is no small amount of money to plunk down, and it's not a bet that Cisco's board would have made unless it was in an upbeat frame of mind.

Consumers Still Trying To Stretch Dollars

Target (NYSE: TGT) - The perma bulls in this market will argue that there may be more profit potential in higher-end chains at this point than in the discount space. I say that the still-struggling middle class will remain eager to shop stores like Target, Wal-Mart (NYSE: WMT) and dollar stores to stretch their dollars further. Target has been performing well on the earnings front and has exceeded expectations for four straight reported quarters. Going forward, I'm optimistic it can continue to perform.

In terms of repurchases, in its fourth quarter release Target reported that under the share repurchase program originally announced in November 2007 and resumed in January 2010, the company repurchased 8.3 million shares of its common stock at an average price of $50.74, for a total investment of $423 million. Again, that is a great deal of money that theoretically might have been spent on building new stores, advertising or refurbishing existing locations.

A Caveat

Some things to keep in mind: Publicly traded companies often have a longer-term investment horizon than many investors. Second, while boards may be eager to buy back shares, it doesn't always pay off or may prove not to be the best investment in time. Finally, a stock buyback program is just one of many data points/items that would-be investors should consider before making any investment decision.

Bottom Line

While a stock repurchase is no guarantee that a stock will increase in value, it may be a good sign that better times are ahead. Again, each of the aforementioned companies has several intriguing points and, in addition, has (fairly) recently repurchased shares. Finally, yours truly believes that each of those stocks has the potential to move higher in the coming year given the current environment. (To learn more, see A Breakdown Of Stock Buybacks.)

Related Articles
  1. Stock Analysis

    Net Neutrality: Pros and Cons

    The fight over net neutrality has become an amazing spectacle. But at its core, it's yet another skirmish in cable television's war to remain relevant.
  2. Personal Finance

    A Day in the Life of an Equity Research Analyst

    What does an equity research analyst do on an everyday basis?
  3. Mutual Funds & ETFs

    ETF Analysis: PowerShares S&P 500 Downside Hedged

    Find out about the PowerShares S&P 500 Downside Hedged ETF, and learn detailed information about characteristics, suitability and recommendations of it.
  4. Mutual Funds & ETFs

    ETF Analysis: ProShares Large Cap Core Plus

    Learn information about the ProShares Large Cap Core Plus ETF, and explore detailed analysis of its characteristics, suitability and recommendations.
  5. Mutual Funds & ETFs

    ETF Analysis: iShares Core Growth Allocation

    Find out about the iShares Core Growth Allocation Fund, and learn detailed information about its characteristics, suitability and recommendations.
  6. Mutual Funds & ETFs

    ETF Analysis: iShares MSCI USA Minimum Volatility

    Learn about the iShares MSCI USA Minimum Volatility exchange-traded fund, which invests in low-volatility equities traded on the U.S. stock market.
  7. Stock Analysis

    Should You Follow Millionaires into This Sector?

    Millionaire investors—and those who follow them—should take another look at the current economic situation before making any more investment decisions.
  8. Professionals

    What to do During a Market Correction

    The market has corrected...now what? Here's what you should consider rather than panicking.
  9. Mutual Funds & ETFs

    ETF Analysis: Vanguard Mid-Cap Value

    Take an in-depth look at the Vanguard Mid-Cap Value ETF, one of the largest and most popular mid-cap funds in the U.S. equity space.
  10. Mutual Funds & ETFs

    ETF Analysis: Schwab US Broad Market

    Take an in-depth look at the Schwab U.S. Broad Market ETF, an incredibly low-cost fund based on a wide selection of the U.S. equity market.
RELATED TERMS
  1. Equity

    The value of an asset less the value of all liabilities on that ...
  2. Hard-To-Sell Asset

    An asset that is extremely difficult to dispose of either due ...
  3. Sucker Yield

    When an investor has essentially risked all of his capital for ...
  4. PT (Perseroan Terbatas)

    An acronym for Perseroan Terbatas, which is Limited Liability ...
  5. Ltd. (Limited)

    An abbreviation of "limited," Ltd. is a suffix that ...
  6. BHD (Berhad)

    The suffix Bhd. is an abbreviation of a Malay word "berhad," ...
RELATED FAQS
  1. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  2. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  3. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  4. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  5. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>
  6. What happens to the shares of stock purchased in a tender offer?

    The shares of stock purchased in a tender offer become the property of the purchaser. From that point forward, the purchaser, ... Read Full Answer >>

You May Also Like

COMPANIES IN THIS ARTICLE
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!