Pondering on buying VHI but concerned about the supposed buyback yield of -Minus 20%
1. Does that mean 20% more shares introduced ? eek! Alarm bells or not?
2. Implications going forward? Your most recent comment was sell (is that still correct?)
4. Buy at what sort of price?
5. Insider ownership is at 10%
What to do?
Cheers
It is true that VHI has issued shares in recent years to fund acquisitions, and investors usually need to look at each situation carefully. However, in some cases, share issuance can make sense if VHI’s share price trades at a much higher multiple in the public market than the multiples paid to acquire businesses.
We think VHI is a HOLD for now, and we would consider it relatively risky, especially as AI continues to get smarter and more efficient each day. We would consider adding to the position when VHI can defend its business against disruption, proving that AI has not materially affected the company’s operating results and competitive advantage. VHI’s insider ownership currently stands around 17%–19%.
If investors already own shares of VHI, we would HOLD for now. If investors are looking to add to the position, we think it is better to wait for some time.