Our Buyback Strategy

Buyback stocks outperform the market year after year, so why not just follow Buyback announcements and invest yourself? Unfortunately, it’s not that simple.

First, not every company that announces a stock buyback actually follows through and executes the buyback as announced. Sometimes the actual number of shares purchased is far fewer than announced – converting a major buyback into a minor, insignificant one you should simply ignore. Other times, a company cancels its stock buyback entirely – often, with no public announcement. In such cases, the only way you’ll know for certain that a buyback has taken place is by looking at a company’s quarterly and annual reports. The Buyback Letter does this detective work for you. We verify that a stock buyback actually takes place and that it is, in fact, likely to lead to higher stock prices. The key is to know who is making the buyback announcement and whether they are likely to go through with it.

At the Buyback Letter, I divide companies that make buyback announcements into three categories: 

• Category 1:  Firms that never follow through with their buyback announcements. We never recommend these companies.
• Category 2:  Companies that buy back stock only if and when their shares are bargain-priced. Sky West Airlines is an example of this type of company. Sky West only repurchases shares when they are close to book value. If share price rises much beyond that level, the company won’t buy its shares back. Companies like Sky West give us the opportunity to make good profits over a two- or three-year period as long as we can buy shares close to the price at which the company itself purchases them.
• Category 3:  Companies committed to long-term buyback programs as a way of building shareholder value. These companies can be counted on to fulfill their promise when they announce a stock buyback, and therefore have the most appeal for long-term investors.  

A picture is worth a thousand words, as we know, so let’s look at a quick snapshot to show the potential of well-chosen buybacks. All of these examples are plucked from our own Stock-Picker’s Portfolio history: *

• Tandy: Buyback Strategy followers pocketed a whopping 564% gain from Tandy, after holding the stock for nearly three years.
• American Express: We bought it in April 1995, and reaped 448% in gains when we sold it in August 2000.
• Intel: I advised clients to buy Intel for $51.88 in April 1995. We sold in June 1999 for  a solid 324% profit.
• Altria Group:  We held this for nearly 10 years, and achieved gains of 339%.  
• AFLAC: We cashed in profits of 306% nearly 3 1/2 years after we bought it.
• Spartan Motors: We held this stock for less than 7 months, and sold in July 2002 for 266% profit.
• Wal-Mart:258% profits in 2 1/2 years. 
• Sky West: Up 187%, after holding for nearly two years.

The Buyback Letter carefully analyzes each buyback stock, each buyback company, separating rhetoric from reality. We pore over announcements, scrutinize quarterly and annual reports, and talk to company officials, lawyers and competitors.

The result:  Profits of 100% to 200% every few years for investors who follow our Buyback Strategy outlined within The Buyback Letter. As a subscriber, each month you receive access to:

• Two Buyback Sector Index Portfolios: Choose from High-Tech or Health & Bio-Tech, with buy/hold/sell recommendations and performance updates.
• Three Buyback Value-Index Portfolios : Beat Dow and S&P 500 stocks by 20% to 50% and more, with our Buyback Index, Buyback Income Index or Buyback Dogs portfolios.
• Our Stock-Pickers Portfolio: 15-30 stocks for those who like personal stock selection. Plus our News Briefs : Current reports on recommended stocks and chronology of company activities.
• Monthly Editor's Commentary: My latest thinking on buybacks, the market, effective investing, etc.
• Monthly Performance and Trading Summary:  Charts that show the latest monthly returns -- and returns since inception -- on all portfolios compared to their benchmarks. This is the place to go when you want to know how we're doing.    
• plus regular buy/hold/sell Hotlines and quarterly market monitor reports.

You'll also enjoy these benefits:

• Immediate online delivery with unlimited access to every issue.
• E-mail notices when each new issue is available.
• Members-only exclusive Special Reports.
• Easy phone or e-mail access to the Buyback Letter editor.

*Past performance does not guarantee future results

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