Based on historical numbers 10 is way too high to be buying back stock. From Jan 2008 - Dec 2012 SWHC was trading below 5 for a total of about 2.5 years. Since January 2008 this stock has never traded higher than 11.25. Many people on this board are likely over-optimistic. While I don't see this falling below 8 again anytime soon I have my doubts about it closing much higher than 10.
"IBM announced a huge buyback during the Asian financial crisis in October 1997, which helped stabilize the market after a 7% plunge in the Dow Jones Industrials. This was after the stock was down huge, so it was probably a good idea to use excess cash to repurchase shares."
Best strategy is to buyback when stock is cheap, reissue when it's expensive, and net the difference. Most corporations don't operate that way mainly because they lack patience, overvalue their own company, and because stock buybacks help to inflate EPS now. This is probably why many analysts put heavier emphasis on declining revenue than earnings gains.
"More often than not, companies end up buying back stock when business is prosperous and cash flow is good-and when the stock is priced high. Conversely, when the economy is in a downturn and companies have less cash, they stop repurchasing shares at a time when they should be buying. "
Earnings, PE, and book value show that SWHC is greatly undervalued ON PAPER.
The caveat - there is no guarantee SWHC will become properly valued over the next 6-12 months before revenue/sales start to decline again. Trade carefully.
There are 3 reasons why your analysis will be rejected on this board and you will be roundly condemned, belittled, vilified and otherwise treated like sh.....i........t.
1) You did not applaud everything management says and does.
2) You did not predict that gun sales will continue forever at a rate at least as high as the current rate.
3) You did not state that the shares are worth at least $16 TODAY and $20 by year end.
Hello fellow trader. I don't agree with your hypothesis, the stock may have hit a temporary wall at $10 but it's only because of the cash Tender offer of $10. it may lag around this number of $10 for a couple of weeks, We shall see, I will leave the predictions up to the fortune tellers
But after expiration of the Buyback on 07/15/2013 I feel then we MAY have a substantial jump in price, "if it didn't already happen by then" but this is only my opinion based on 29 years experience in trading and surviving, "May it be barely by the skin of my teeth at times of economic calamity and manipulation I have experienced over the years" but I wish you luck either way, long or short.
P.S. This is the absolute worse I have ever seen in the stock market and economy in my life
Yep, you'll be crucified for this blasphemy paul.
Always amazes me that they didn't do big big buybacks in the $3 range. They should have cut CapEx down to $0, slashed all other expenses, even Options and executive salaries to throw at buyback in the sub $5 area. What a message that would have thrown at shorts. I just think in a course of business practices, mgmt. really doesn't care to put much EFFORT into strategizing to help the retail shareholder. It's always been about compensation; and a buyback at $10 to them is no different than a buyback at $5 as long as they can cash their Options in at IN-THE-MONEY prices.
Let's face it. If they had long term thinkers here, they would have more production facilities than one large plant and one 35,000sq. ft. shed after 162 years.
Can you imagine Coca-cola , Kraft, Proctor and Gamble who have all been in business for 100 years or so still stuck in the same position?
They tried to expand with the security fence area, but was bamboozled by Banksters and advisers. Why they did not stick to their core production theme is still a great mystery and Mr. Golden will not go down in history as the titan he wanted to be. Thus, he is happy to settle on stealing top money through Options to show the world he is a rich many, even though not a Titan of industry.
See now, there you go again. Talking that free market capitalism where manufacturers make a better product and by using economy of scale, make more, lower prices and gain market share. That old theory is just a talking point that built this country, but is useless in the modern world of looting all the value from everything possible.
The stock IS cheap. It is cheap because it is trading at historically low P/E range right now. So it is not a bad time to do a buyback. It may have been better to combine it with a dividend. One way or another, they have to rid this dog of the fleas and ticks - the excessive number of shorts that pile on in the past year at every rise in share price.
I made 21% LONG buying in the low 8s in early December. I sold on June 25. Like many on this board I thought the sky was the limit for this stock. I held this through March earnings as each floor of support got knocked out...10.00, 9.50, 9.00 and finally 8.50. Since December there has been no support above 10 which is a strong psychological level.
Strong earnings/gun demand over the past 2 QTRs were expected. Otherwise this would have shot up 10-15% post-earnings. I'm not short, just stating my opinion. If you stay long and this goes all the way up to 12 or 13 good for you, I was wrong.
*The most common mistake made in the stock market today...People have a tendency to fall in love with their stock, set lofty price targets, and refuse to get out when things start turning south. People refuse to reevaluate their position/investment. A 30% gain drops down to 20% and before you know it you're back to even.