Buy back

Buy back usually works, but not always. When the management knows their company's stock is under valued and they have cash or cheap access to, they should buy back. They're the insiders and know the company better, but statistically they tend to buy at higher prices for buybacks.

The management prefers buyback as it usually boosts the stock price and it would affect their stock option rewards. They will take care of themselves first.

Without their own agenda, they should look at what is better for an average stock holder on how to use the extra cash: plowing back to research/development, buying back, lowering debts, giving dividends... with regard to enhancing the future profit of the company and the tax treatment.

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No one knows the company better than the management (i.e. the insiders). There are many financial data you cannot find in the financial statements or they're not updated. The drug company CEOs are the first ones to know the new drug will be approved. The sales folks know a big contract is being signed. The analysts are all second guess and we'll never know until there are in the public.

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(c) TonyP4 2012. Written in 2/29/12. Last updated in 2/29/12.

Disclaimer:

Do not gamble your money you cannot afford to lose. Past performance is a guideline and does not guarantee future performance.

All my posts are for informational purposes only. I'm not a professional investment counselor. Seek one before you make any investment decision.