In today’s briefing:
- Companies that Buy Back Their Own Shares but Do Not Increase Their Share Price Should Consider Why
- A Win for Truston Asset Mgmt: Corporate Activism Worked on Taekwang Industrial
Companies that Buy Back Their Own Shares but Do Not Increase Their Share Price Should Consider Why
- Companies are presumably allocating cash to shareholder returns rather than investing in growth. Lack of investment in growth may lead to slower profit growth, which leads to lower valuations.
- There is concern that management may be hesitant to take risks. Since no shareholder hates shareholder returns, they may be easily diverted to share repurchases that don’t require risk-taking decision.
- Although the expected share repurchase will limit the risk of sharp decline in the stock prices, modest growth investments are likely to prevent the expansion of multiples.
A Win for Truston Asset Mgmt: Corporate Activism Worked on Taekwang Industrial
- This insight provides the details of how a local asset management company called Truston Asset Mgmt has been able to win a corporate activism battle against Taekwang Industrial.
- Taekwang Industrial has repeatedly been boggled down by numerous corporate governance related issues for more than a couple of decades.
- The overall result should be a modest positive sentiment on Taekwang Industrial’s shares in the near term which still trades at dirt cheap P/B multiple of 0.2x.
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