A study of analyst recommendations at the major brokerages shows that OmniVision Technologies Inc (NASD: OVTI) is the #18 broker analyst pick among those stocks screened by The Online Investor for strong stock buyback activity. To make that list, a stock must have repurchased at least 5% of its outstanding shares over the trailing twelve month period. In forming the rank, the analyst opinions from the major brokerage houses were tallied, and averaged; then, the list of stocks with strong buyback activity was ranked according to those averages.
Investors are often keenly interested in knowing which companies are buying back their own stock, because companies often will only make such a move if they feel their stock is undervalued. OmniVision Technologies Inc is a company with strong buyback activity that is also considered a compelling buy by analysts; a bullish investor could take this to mean that sharp analyst minds came to the same bullish conclusion as the company itself that the stock is a good value, and therefore the stock should do well in the future.
Analysts studying companies buying back their own stock will also factor into their analysis that future earnings will now be spread over a smaller share count, thereby increasing the per-share earnings the remaining shares will enjoy, versus what that same number would have been absent the stock buyback activity.
That theory is usually correct. However, if you know anything about the history of OVTI you will know that they do not do buybacks for the benefit of their shareholders. The reduction in outstanding shares is gone in a blink as they distribute the purchased shares back to manglement in the form of options which are constantly being cashed in. Essentially, the retained earnings from net income is cycled back to insiders through this procedure, over and over and over------.
While what you say is true, there are only 53 million shares or so outstanding. The buyback, in my opinion, still causes the stock to move. Say the buy back 10 million shares and then they give 10 million shares to employees, still only 53 million shares out there, which is not a lot.