Stock buybacks: Another one, at the right time

As promised in the previous post, here is another idea of a company that has taken advantage of their low priced stock by declaring stock buyback or repurchases. The company is Markel Corporation (MKL) which is a specialty insurance company modelled much like Berkshire Hathaway. Markel's investment division is run by Tom Gayner, who is a pure value manager.

It is not surprising that Markel decided to repurchase their stock in open market when the stock was at a long term low price to book ratio of 1.11.

Source: Ycharts

This repurchase transaction is a value enhancing action that is bound to increase the book value of Markel at exceedingly fast rates. Over years, as the price of Markel reverts back to the long term Price to book mean of 1.7, the shareholders will be generously rewarded.

Disclosure: I am an owner of Markel at the time of this writing.

Stock buybacks: At the right time

I greatly enjoyed Saj's post on stock buybacks at the wrong time. I wholeheartedly agree that this is a value destroying trend. When money is plentiful, it is invariably true that the assets are priced richly.

Although, I would like to point out two exceptions to this.

Cisco Systems (CSCO) recently experienced a sharp drop in the share price because of a guidance mismatch. Since this organization has a solid balance sheet with $38B in cash, they immediately announced that they will begin a $10B share buyback at those low prices. Cisco is a business that is often subject to market's extreme sentiments, positive or negative. It is good to see that the management realizes that and plays to that sentiment to increase shareholder value.

I will post my second example in the following post.

Disclosure: I own Cisco at the time of this writing.