Tuesday, December 22, 2009

Fundamental Analysis: Share Buysback

Share Buybacks basically means the company of the stock is buying back their own shares in the market. This means that the total number of shares in the market will be reduced due to the act of Share Buybacks.

Share Buybacks is a good action taken by the company if the company has excessive cash or fund. This is because Share buybacks will reduced the total number of shares in the market and thus will create several benefits as follow:

Benefits of Share Buybacks:

1. Increase the Earning Per Share (EPS). I hope you still remember what is EPS, if you have forgotten, you can read it again.

2. When shares are being bought back by the company, this means the number of outstanding shares in the market is being reduced and the shares you are holding become more valuable.

3. A company that is executing Share Buybacks gives investors and traders a clear opportunities. This is because company that is buying back their own shares means that they are confident with the company's performance and Share Buybacks gives investors and traders a signal of better future growth. (Think of it this way: If Company A is buying back their own shares in the market, surely the company is very confident that their company will perform better in near future. It might also means that the price of the stock will be going up soon.)

Recently, there is a company constantly buying back their shares in the market. I am constantly checking and I found a company that is buying back their shares at large amount from the market.

What might it means?
It might be a signal of share price growth in near future due to large amount of share buybacks. So, it is a chance for investors and traders to take the opportunity to buy the stock.

The Company I found that is constantly buying back their shares:
BJTOTO is the company buying back their shares at large amount these few days. I include the details in the picture below:

I can only show you the data of two days (Data obtained from TheStar.com.my) because old data is not shown. I was checking few days ago (3 days) and BJTOTO is buying back their shares at large amount. As you can see the company is buying back at large amount for 3 days. Since the company is so sure and buying back their shares at such a large amount, it might means something good is going to happen soon. So, what do you think investors and traders should do? I am sure you have the answer yourself.

Share Buybacks is beneficial for the company and it is beneficial for investors and traders as well. Try to look at BJTOTO for a few days and look at the price movements, if it shows positive signals, do not hesitate to buy.


I have bought some BJTOTO at RM4.21. If my analysis on Share Buybacks are correct, the stock price will go up in near future and I will be able to gain some good return from BJTOTO.

Happy investing and Merry Christmas!!


K said...

This counter has been my best dividend income generator for my investment. A good buy.

Greenleaf said...

Yeap, it is a good counter for dividend. It would be even better if we could earn some capital gain from it. :)

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