National Oilwell Varco: Why The Market Reacted So Badly Yesterday
- NOV announced the first share buyback program in its history yesterday. The amount of the program is $3 B, which corresponds to 9% of the total outstanding shares.
- Although the buyback program provides an additional 5% daily bid on the stock, the market considered the announcement as a management's signal that there are no growth prospects ahead.
- Several companies have resorted to share repurchases only to mask their lack of growth or business deterioration at this phase of the economic cycle.
- However, given the excellent record of the management and the fair price at which the buybacks will be executed, I recommend purchasing shares if they drop further towards $70.