There are 2 things that I've learned today, 1) Share Buy Backs and 2) Stock Option Plan. The first one, Share Buy Backs, is a good indication that a company is doing good. Both Peter Lynch and Warren Buffett indicated that a company buying back shares means that the company is investing in itself. It is also an indication that the company is doing well, but the market, with all their reasons, is not responding positively in its stocks. So they are determined to minimize the supply of common shares by buying them and so affecting its supply and demand in the long run.
In my previous post about Growth Stocks, and my desire to invest 3 in mind, having looked at their financial statement, all of them are really strong and great companies with sound management, with little to no debt at all. The deal breaker for me was that 2 of them are buying back shares since October 2011. This is insane! This is probably the undervalued stocks that we have been searching for. So to test this out, I added more funds to my account and started buying the shit out of these 2 stocks. Let's see if our judgement is correct.
Stock Options Plan
Stock options are bonuses for CEOs of the company and management staff. They are awarded with shares of the company as bonuses. The good thing is, it tells us that the company is doing good. The bad thing is, it dilutes the stock. They do not buy from the market, they add shares to the market. And when there's a lot of supply, sooner or later, stocks will go down. This is seen in my JFC (Jollibee Food Corp) stock which is down for consecutive days.
Freedom Fund: 6.12% vs PSE Index 8.6%
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