If you were to go by buyback announcements to invest in equity, you'd be pretty busy these days. With buybacks becoming Wall Street's favorite hobby, how do you choose the best stock to invest in?
You look at the buybacks. OK, I'm not trying to take you around in circles. But if you see a company repeatedly buying back its shares, you can be sure of one thing: The company sees value in its shares. This could really be a signal for you to buy, too.
One such company is
. (On Stockpickr, you can see the rest of today's
insider trades and buybacks).
Chubb's board has approved the buyback of up to 28 million shares of the company's common stock, representing a little over 7% of the company's outstanding shares as of Sept. 30. The Warren, N.J.-based casualty and property insurer plans to complete its existing buyback program of up to 40 million shares before the end of the year. In the first nine months of this year, the company spent $1.7 billion to repurchase 31,919,816 shares.
Chubb reported strong third-quarter results, with operating-income-per-share surging 23% to a record $1.68. The EPS guidance for 2007 was raised to between $6.05 and $6.15, from between $5.70 and $6.10.
The company has financial flexibility, and its decision to buy back shares is sound. It has been achieving a strong underwriting and overall operating performance, with Bernstein recently upgraded it, boosting Chubb from market perform to outperform.
You could glance through
all of the investment funds that own Chubb at Stockpickr.com. Some that have recently increased their holdings of CB are:
Delaware Dividend Income A, run by Damon Andres, has a Morningstar rating of five stars. The fund's objective is to seek high current income and capital appreciation, and it has generated five-year annualized returns of 11.42%. The fund also owns
Vanguard Global Equity, managed by William Arah, has a Morningstar rating of five stars. The fund's objective is long-term capital appreciation, and it has five-year annualized returns of 22.59%. The fund also owns
The company has momentum and is likely to do well in the future. It does not have exposure to the subprime mortgage crisis. The P/E/G ratio is 0.89. The buyback would act as a cushion for the share price. I believe buying the stock below $53 will yield to positive (chubby) returns over time.
At the time of publication, Raznick had no positions in the stocks mentioned, although positions may change at any time.
Jason Raznick is president of
and has been involved with the capital markets for several years. He has worked for Merrill Lynch, Dynamis and Tricap Holdings, a joint venture with Fortress Investment Group. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Raznick appreciates your feedback;
to send him an email.