I stand corrected on the share buybacks, the share count has decreased markedly. My fault for only looking back 3 years.
As for the question of what you do with the copious amounts of cash NVR generates. A company can buy back shares, directly reward shareholders with dividends or --if the housing market is so fantastic and will continue to yield the best returns--you buy up every piece of land available and expand the business.
My perception is that the major executives--that know a lot more about the RE market than I--sold a lot of their shares.
A this point it is up to the individual to make the determination as to why the upper management would rather take the cash than debtlessly expand the company.
Not the amount of shares, the percentage of shares. The price has nothing to do with that. It is the P/E ratio. yes the P/E is 10 when it use to be 8, but still, buybacks should continue at the same rate, not number of shares, but percentage of stocks outstanding. Which is has not.
That being same NVR issued a new buyback program in December.
You make the claim that if a company is buying back shares that it is somehow sinister. Buying back shares is one of the top ways to increase shareholder value especially when a stock is below P/E 20. The name of the game is earnings per share. Any way the company can accomplish that is a ok. NVR has grown like a weed even with the share buybacks. Too fast if anything. However, in the 1980s things were not as rosy, once they started the buybacks eps has exploded.
Expanding the business for sake of revenue growth is one way to cause a crash in the business. There is limited amount of revenue that can be taken out of the housing market. 30-40 percent earnings growth is fine with me.
Personnally developing raw land is rather sick and disgusting. They should be trying to get in the business of rebuilding older rundown areas.
The exact opposite, I highly value share buy backs. I was mistaken (and admitted the mistake) on my perception that a majority of the money was buying back diluting shares that were issued to cover option grants�when this happens there is no reduction in outstanding shares and therefore no benefit to the shareholders.
My point about investment is simply the strong buys on this forum inform us how homebuilding is the greatest business with great growth prospects for the next 5? Years. If this growth rate is accurate, the best return for the net positive cash flow is right back into the business.
As you know NVR carries quite a bit of debt. Generally a business carries debt due to cash flow fluctuations or simply they can make a better return than the debt costs. Why doesn�t NVR simply fund their business from cash flow and decrease the debt? I don�t know the answer, perhaps somebody out there does.
I think management is cashing out of stock options because if they don't they may lose them. Most options expire after a period of time. 5-10 years. Alot of the options cashed were issued at 10.25 back in 94. Whay do you think? Best wishes