Expert: Paul Henneman - 5/7/2004

Question
What significance is it to the investor when a company has a buy back of its outstanding common stock?  Is this a good thing or a bad thing to one who owns stock in that company?

Answer
Thank you for your question Vicki!
Generally, in my opinion, the buyback of stock by a company is a good indicator. This typically means that they are trying to increase their own percentage of ownership, and must have good feelings for the future of the company. For example, if alot of cash is on hand, this could be used to buy back stock. Also, this activity generally forces the stock price higher.
There are other reasons that would not be as favorable, such as various actions to prepare for a merger or buyout. You should look into the specifics for the company you are interested in, but the larger the buyback the more it should attract your attention.
Whatever the reason, the buyback indicates that the company wants less of its stock out there and publicly traded, and more of the ownership of the company in private hands.

I hope this helps! Please do not hesitate to follow up with me if I can be of additional service,

Sincerely,
Paul Henneman
President
ValuEngine, Inc.
www.ValuEngine.com