PotashCorp. Buybacks: A Sign of Undervaluation?

Update (September 7): PotashCorp announced after the market close on Friday that it purchased an additional 500,000 shares for cancellation in a private agreement with one or more arms-length third-party sellers. This increases the amount of shares bought back this year to 15.15 million shares.

********************************************************************************

PotashCorp (POT) bought back and canceled 2.1 million shares in August, according to the latest SEDI filing. The average price paid was $175 per share, and a total of nearly $370 million was spent on the buyback for the month.

By my count, the company is just 1 million shares short of buying back the 5% authorized by the board--having bought back roughly 14.65 million shares so far.

Although there was some selling by insiders in the month--related to the exercising of options--insider buying continues to be very strong. Below are my quick computations for the month, which you all are of course free to double-check:

• Clark Bailey spent 95,209 dollars buying 550 shares
• Mark Boulanger spent 69,018 buying 385 shares
• Karen Chasez spent 9,367 dollars buying 50 shares
• James Dietz spent 798,822 dollars buying 5,000 shares
• Clark Huff spent 288,912 dollars buying 1,600 shares
• William Garreth Moore spent ~532,000 buying 3,000 shares
• David Stuart spent 212,276 dollars buying 1,174 shares
• William Keith Thornton spent 31,638 buying 200 shares

As I've said before, a company that is buying back shares--or that has employees doing so--is not necessarily undervalued. But if you have done good research, come to that conclusion, and see buying patterns like the above, things are probably going to work out in your favor. (At some point.)

Disclosure: Author holds a long position in POT

Comments

[Paul Price:]

That $175 per share average price for their buyback looks like a bad use of corporate cash with POT stock under $70 today.

2008 Nov 18 04:19 PM