Now is a Good Time to Buy Back Stock

Many companies borrowed money to buy back stock when their stock prices were high. Now that stock prices have fallen they are conserving cash. That is backwards. One tiny little company did the opposite. That company is TSR, Inc. [[tsri]]. I have previously written about TSR, recommending it when its stock price was about twice as high as it is now (oops), and then writing about my attempt to get the company to spend its cash hoard. The company instituted a buyback plan but bought few shares. Then today it announced that it had just bought back over 10% of the outstanding shares at a price of $2.30 per share. At this price the company bought its stock for 80% of its net cash + receivables + Treasury bonds. This will be accretive to book value per share and will not harm the company’s liquidity. That is how companies should use buybacks.

From the press release:

TSR, Inc., (NASDAQ:TSRINews) a provider of computer programming consulting services, announced today that it had repurchased 456,523 shares of its Common Stock in a private transaction at a purchase price of $2.30 per share. The repurchase is in addition to repurchases that may be effected from time to time pursuant to the Companys previously announced stock repurchase program. Pursuant to the stock repurchase program, the Companys Board of Directors has authorized repurchase of up to 300,000 shares, of which approximately 61,000 have been repurchased. There were approximately 4,500,000 shares outstanding prior to the purchase.

At current prices I believe TSR to be an excellent investment. By my calculation, the company’ recent buyback increased the per-share net quick assets (net cash plus marketable securities and receivables, including non-current treasury bonds) to $2.97 per share from $2.90 per share. At $2.30 per share it is at under 80% of net cash plus marketable securities and it trades at a P/E of 11. The stock is illiquid, so anyone buying it should use limit orders.

Disclosure: I am long TSRI.

0 thoughts on “Now is a Good Time to Buy Back Stock”

  1. Hi Michael. Could I get your opinion of OCCXD as a longer-term short? I know Tim’s strategy is to go short and then cover quickly, but judging from the financials this company is in bad shape. It could go bankrupt like WRSP just did. The shares are not very liquid, though. What do you think?

  2. Andrew, don’t remind me of 1WorldSpace (WRSP). I covered at $1.90 just before its death plunge. Yeah, Occulogix could be a good long-term short, but I did minimal due-diligence. I get scared of such illiquid stocks.

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