Not All Buybacks Are Equal: How to Identify the Smart Ones 🤔

Shareholder-Yield , quant-screeners , Qi-Value , Piotroski-F-score , Buybacks

Are you looking for companies making smart stock buyback decisions?

This article shows you (step by step) how to set up a stock buyback screen that finds companies that are:

undervalued,
conservatively financed
with enough cash to fund expansion and research and development and
are doing stock buyback.

Not all buybacks are good

As you know, not all stock buybacks are good for shareholders because they are done for VERY wrong reasons. Here are a few of the worse:

To keep the stock price up
To manipulate the stock price – think stock options
Because everyone is doing it
Because debt is cheap
To lever up the balance sheet
To keep the high company valuation
To boost earnings per share
To counter the dilution of stock options
To fend off an takeover
To get rid of cash
Because an activist wants to make a quick profit

I am sure you can also think of a few more.

Stock screen to find companies making smart buyback decisions

We gave the idea of finding companies making clever buybacks a lot of thought and put together a stock screen to help you.

This is the stock buyback screen

With this screen you can find companies:

Listed in the main developed stock markets worldwide that,
Over the past 12 months bought back a lot of stock but
Does not have a lot of debt and
Is undervalued.

This is what the screen looks for:

The 30% of companies with the highest Buyback Yield
The 40% of companies with the lowest Net Debt to EBIT
All the main developed stock markets worldwide
Minimum 30 day average traded value of USD 100,000

The screen looks like this:

Click image to enlarge

Click here to start finding your own companies doing smart stock Buybacks NOW!

Companies with the highest stock buybacks

To find the companies with the highest stock buyback yield, add Buyback % as an output column, then click twice on the Buyback % column heading to sort it from high to low.

This is what your screen results should look like:

Stock buyback screen sorted by buyback yield

But these companies aren’t cheap

But the above list does not tell you if a company is undervalued. To find cheap companies with high stock buybacks we looked for companies with the best Qi Value ranking.

You can read more about the Qi Value ranking here:

Qi Value investment strategy back test

Qi Value Investment Strategy

This investment strategy is working even better than we expected +711%

This is the stock screen:

The 30% of companies with the highest Buyback Yield
The 40% of companies with the lowest Net Debt to EBIT
All the main developed stock markets worldwide
Minimum 30 day average traded value of USD 100,000
Selected companies with a Buyback Yield above 3%
Sorted this list by Qi Value from low to high (low is the best Qi Value ranking)

This is the list of companies that came up:

Stock buyback screen sorted by Qi Value

Stock buybacks combined with Value Composite One

In this example we used Value Composite One to find undervalued buyback companies.

This is the stock screen:

The 30% of companies with the highest Buyback Yield
The 40% of companies with the lowest Net Debt to EBIT
All the main developed stock markets worldwide
Minimum 30 day average traded value of USD 100,000
Selected companies with a Buyback Yield above 3%
Sorted this list by Value Composite One from low to high (low is the best Qi Value ranking)

Here is the list of companies:

Stock buyback screen soeted by Value Composite One to find undervalued companies

Click here to start finding your own companies doing smart stock Buybacks NOW!

To find better quality companies add the Piotroski F-Score

To improve the quality of the companies even more we added the Piotroski F-Score.

Take a look at the list of articles below, you will see that the Piotroski F-Score is the closest thing you get to a universal indicator to increase the return of your investment strategy.

You can read more about the Piotroski F-Score here:

This academic can help you make better investment decisions – Piotroski F-Score

Piotroski F-Score back test

Can the Piotroski F-Score also improve your investment strategy?

This is what we screened for:

The 30% of companies with the highest Buyback Yield
The 40% of companies with the lowest Net Debt to EBIT
All the main developed stock markets worldwide
Minimum 30 day average traded value of USD 100,000
Selected all companies with a Buyback Yield above 3%
Selected only companies with a Piotroski F-Score greater than 6. (9 is the best F-Score and 0 the worse)
Sorted this list by Qi Value from low to high (low is the best Qi Value ranking)

Stock buyback screen sorted by value ind the Piotroski F-Score

That is all you have to do to find companies making smart buyback decisions.

You can save this screen

As with all screens in the Quant Investing stock screener you can save your screen so you can call it up with only a few mouse clicks.

Remember a stock screen is just the start

Please remember a stock screen is just the starting process of your research. Verify all numbers and look if the companies have not changed substantially after the last reporting date.

To help you this is the research we do with the companies we select for the Quant Value investment newsletter: This is how we select ideas for the Quant Value newsletter

PS To implement this stock buyback investment strategy in your portfolio click here to: Sign up right NOW!

PPS It is so easy to put things off or forget so why don’t you do it right now?