A Four-Pack from Fried

11/26/2004 12:00 am EST


David Fried

Editor, The Buyback Letter

David Fried is the only financial newsletter service to base its recommendations on corporate buybacks. His unique strategy has certainly worked; since inception in 2000, his portfolio is beating the S&P 500 by more than 123%. Here are some of his latest buys.

"Houston Exploration (THX NYSE) is an independent North American natural gas and crude oil producer that develops, explores, and acquires natural gas and crude oil properties. Its operations are focused in South Texas, the Rocky Mountains, the Arkoma Basin (in Arkansas and Oklahoma) and offshore in the shallow waters of the Gulf of Mexico. THX reported third-quarter 2004 net income of $43 million, or $1.51 per fully diluted share, an increase of 36% from the third quarter of 2003. Revenues for the quarter totaled $162.8 million, up 37% from the same quarter last year. Cash from operations before changes in operating assets and liabilities was 30% higher than the third quarter of last year, and total daily production increased 19% year-over-year. No wonder the management of THX has repurchased 9.6% of its net shares outstanding over the past 12 months.

"NVR (NVR ASE) is one of the nation's largest homebuilding and mortgage banking companies. Its homebuilding operations include the construction and sale of single-family detached homes, town homes, and condominium buildings under the trade names Ryan Homes, NVHomes, and Fox Ridge Homes, primarily in the eastern and southeastern parts of the US. In addition, NVR provides mortgage-related services through its mortgage banking operations in 11 states. In 2003, NVRM closed about 10,200 loans worth about $2.4 billion. NVR’s recent earnings report was stellar. For the nine months ended September 30, 2004, revenues rose 19% to $3.05 billion. Net income rose 25% to $364.3 million. The stock continues to rise and the company continues to repurchase shares. They have repurchased more than 11% of their shares during the past 12 months. Betting against NVR has been a fool’s game.

"Yankee Candle Company (YCC NYSE) is the leading designer, manufacturer, retailer, and wholesaler of premium scented candles in the US. With our current national obsession with affordable luxuries, candles and other consumable gifts are big business. Yankee sells through a North American wholesale customer network of some 15,500 store locations, a growing base of company-owned retail stores (334 located in 43 states), direct-mail catalogs, and its Internet Web site. Products are available in some 180 fragrances. Success never smelled so sweet. For the 39 weeks ended October 2, 2004, revenues rose 10% to $335.3 million. Net income rose 16% to $34.7 million. YCC has a robust stock repurchase program as well. Through the end of the fiscal 2004 third quarter, the company had purchased a cumulative total of 3,027,800 shares of its common stock. For the 12-month period ending October 30, 2004, shares outstanding fell 10.7%.

"TXU Corp. (TXU NYSE) is a Dallas-based energy holding company engaged in power production, retail and wholesale sales of electricity and natural gas, and the transmission and distribution of electricity and natural gas, primarily in Texas. The company has more than 2.6 million electricity customers in Texas and is also among the largest purchasers of wind-generated electricity in the country. For the nine months ended September 30, 2004, revenues rose 7% to $7.18 billion. During 2004, TXU Corp. has repurchased 32 million shares of common stock, and last month the board of directors authorized the repurchase of 50 million shares of common stock. Shares outstanding have declined 7.9% over the prior 12-month period. If the new authorization to repurchase another 50 million shares is executed, shares outstanding will decline an additional 16%."

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