Buyback Bets

04/30/2004 12:00 am EST


David Fried

Editor, The Buyback Letter

David Fried, editor of The Buyback Letter , has added three new positions to its Buyback Premium Portfolio. This portfolio is up 108.29% since inception (August 2, 2000) vs. a 21.70% decline in the S&P 500 over the same time frame. Here is a review of the latest additions:

"New Century Financial (NCEN NASDAQ) is one of the nation's largest non-conforming residential mortgage companies. Borrowers generally have substantial equity in the single-family home securing the loan, but have impaired or limited credit profiles or higher debt-to-income ratios than traditional mortgage lenders allow. Highlights for 2003 included record per share net earnings of $6.56 and record production of $27.4 billion. The firm also reaffirmed 2004 EPS guidance of $7 or higher and 2004 loan production of $30 billion or more. NCEN also has a healthy and consistent buyback program, representing a serious reinvestment in the company. In October 2003, the company’s board authorized the buyback of 1 million shares, which brought the total authorization for the stock repurchase program to 5.8 million shares. Over the past 12 months, net shares outstanding have decreased by 4.3%.

"Armor Holdings (AH NYSE), which made Forbes magazine's list of ‘200 Best Small Companies’ in 2002 and 2003, is a manufacturer of products for the military, law enforcement, and personnel safety markets. The company sells a range of branded law enforcement equipment such as concealable and tactical body armor, hard armor, duty gear, munitions, and anti-riot products. This division had double-digit sales growth last year, aided by increased sales of body armor to law enforcement and the military. The Armor Mobile Security division is one of the world’s largest and most experienced passenger vehicle armoring manufacturers. For year 2003, this segment’s revenues improved by 26% compared to the prior year, and the trend is likely to continue as more armored vehicles are needed, especially in the Middle East. Next year’s sales are expected to be twice 2003’s level, providing ample cash for its acquisitions as well as its share-repurchase program. Armor has decreased its shares outstanding by 4.4% over the past 12 months.

"Stanley Works (SWK NYSE), an S&P 500 company, is a worldwide manufacturer and marketer of tools, doors, hardware, and specialty hardware products for home improvement, consumer, industrial, and professional use.  Stanley has also been in a buying mode. Earlier this month, Stanley acquired Frisco Bay Industries, an international provider of security systems and equipment for financial institutions, government agencies, and major industrial corporations. In January, the company acquired Chicago Steel Tape, a designer and manufacturer of laser and optical leveling and measuring equipment. And Stanley is acquiring Blick, a British security integration, communication, and time management company. Management has shown its belief in the company’s long-term prospects by repurchasing 6.6% of all outstanding shares over the last 12 months."

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