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.
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.
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.)