PF: I like stock buybacks. But do my companies’ managers?

I read YAVB’s recent post and liked his two questions making me think about which companies that I own buy back their own shares … and which don’t?

This is not investment advice. Please read the disclaimer. I might own discussed stock(s) currently or at a later time.

Asking (i) why an investment should deliver outperformance (risk adjusted) and (ii) do they buy back shares is a nice combo of questions (YAVB). If you think that an investment opportunity will deliver outperformance from here — in other words it is currently undervalued — it is reasonable to assume that good management knows about the undervaluation and would take advantage via share buybacks. Either managemnet isn’t that good/shareholderfriendly, or has better investment opportunities. Or any other reason applies. Time for a quick portfolio review:

CHKP uses all the fcf to buyback stock. This is a lot, but using some spare cash of 3.8bn would be even nicer, imho.

PGR did not shrink its share count for the last few years and I think they should no do so, since better uses of capital were available and they operate rather at the edge (3x premiums to surplus). Since 2017 sharecount slightly increased.

SES does pay dividends but buybacks are seldomly done. I think of SES of a turnaround and do not believe management to be superb.

Flow Traders is growing and needs a lot of capital for that, especially when trading with more brokers (margin requirements, less netting). Share count is not reduced, instead large chunky dividends (good enough?).

Africa Oil (AOI) does not buyback shares and this is kind of ridiculous. They believe (or state to believe) they can create more value acquiring other companies. Which might even be true if wettern majors want to sell African assets (ESG vitue signaling).

Shinoken does buybacks but as a ‘good Japanese corporate’ each and every buyback program is for a tiny 1% of outstanding shares or so, afterwards there is always the opportunity for the board to meet again for the next 1% approval (and wine and dine). If there was a strong sell off, they could not act immediately.

Krka buys back stocks but makes more use of dividends. (currently stopped: here)

Inpex recently bought back a stake from Japex, so this one was rather special but their capital allocation going forward might be for more buybacks.

Nintendo holds a lot of cash and could do much more with regard to buybacks.

Oriental Watch did a tender in recent years. Currently no buybacks. High dividends. ODET, Bollore use some capital to buy back shares of companies, not necessarily their own. Pay some dividend.

Protector buys backs its shares from time to time, and rather infrequently, that is not a bad sign.

Mo-BRUK does not buyback shares.

Qualitas pays out more profits as dividends vs buybacks but liquidity somehow limits buybacks.

Epsilon does no buybacks.

Tick TS: no buybacks. Recently a stock split. Bid-ask spread is still sky high.

Talanx no buybacks. (Already marked as sell, due to low ROE targets).

Only my biggest holding (CHKP) is allocating all/most capital to buybacks. A whole bunch uses some capital to reduce shares outstanding besides using more for dividends. The ones not buying back any shares do mostly not have a good reason for paying dividends instead of reducing their sharecounts.

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