When companies are buying back their own shares of stock on the exchange, it is, in general, a clear sign of stocks being undervalued by the market. That is now the case for us. It very well speaks for itself.
Company buybacks on the PSE
Companies have been buying back their shares on our bourse. To name a few, we have Filinvest Land Inc., Roxas Holdings, CADP group, PLDT, Chemrez Technologies, Vista Land and Lifescapes, Aboitiz disclosing buybacks and the list goes on.
Disclosures published at pse.com.ph
By simply perusing the website of the Philippine Stock Exchange, one will see many company disclosures of share buybacks.
A look at FLI
FLI had an IPO last year and the price of the shares was around PHP1.92ish on the day they were offered. In their disclosures they were buying the same shares back at around 1.08. That would mean they would net almost half of their IPO price and be left with the shares in their names. How brilliant.
A Devil's Advocate perspective
It is possible that behavior like this is calculated to keep stock prices from falling further and is no more than a strategy to boost the image of the shares. However, I'm more inclined to think that that's not the case this time around because of the scale of the buybacks in terms of the number of companies doing it and the number of shares they are buying back. Assuming for sake of argument that it is no more than a mere strategy to encourage higher market valuation, companies will not risk buying back large amounts at overvalued levels. So at the very least, we'll know that the prices are at a reasonable level. That is, at the very least, even with an devil's advocate perspective.
Something to watch out for
I think behavior like this is, in this case, a good indicator that the stocks value is higher than where the market is pricing it at. Over the next few days, I want to watch for more similar activity.
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