Last week in my Cabot Value Issue page 1 commentary, I opined that many U.S. companies are using their excess cash and proceeds from borrowed funds to buy back stock, which could become detrimental to long-term growth objectives.
Rather than buying stock from shareholders to reduce the number of shares outstanding, management should be using these funds to invest in new products, increase productivity and invest in the labor force.
One quick way to find companies that don’t buy back excessive numbers of shares is to identify companies with increasing sales. If sales are gaining at a reasonable pace, then chances are good that share buybacks are not holding back the company’s growth.
A quick perusal of my Enterprising Model Current Buy Recommendations reveals that eight of the 16 buy recommendations produced double-digit sales gains during the past 12 months compared to the previous 12-month period. The remaining eight stocks are selling at extraordinary low prices and possess good prospects for future growth.
This is an excerpt from Cabot Benjamin Graham Value Investor, which features the very best undervalued stocks to buy right now. Chief Analyst J. Royden Ward tells you exactly which undervalued stocks to buy and when to take profits. This advisory is ideal for conservative investors.
Subscribers' comments on Cabot Benjamin Graham Value Letter