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The Tuzz Report Idea Generator: High Conviction Buybacks Outperform

Jim O’Shaughnessy recently released research indicating that high conviction buybacks outperform.

Included is a screen for high conviction buyback stocks in the small-cap space.

PRGX Global is highlighted by the screen and may be on the verge of a business turnaround.

In this week's Tuzz Report Idea Generator the focus is on buybacks. They often get a bum rap and executives are often blamed for buying shares back when stock prices are elevated or simply using repurchases as window dressing. However, high conviction buybacks are another story completely.


Patrick O'Shaughnessy recently published an article titled "High Conviction Buybacks." His conclusion was that large-cap companies that made buybacks in excess of 5% outperformed the large-cap universe by 4.7% annually from 1987-2014. Results are displayed in the following chart that appeared in his article.

Does this carry over to small-cap companies? I don't think it takes a great leap of faith to assume that the same management motivation applies. They tend to make significant stock repurchases when they believe that the company's stock is inexpensive.

I run a daily screen that looks for these large buybacks and this last week I was alerted to PRGX Global (NASDAQ:PRGX). The company provides audit recovery services which involves the mining of a businesses' purchasing data to uncover overpayments to third-party suppliers.

The company's buybacks, which have equaled 10.4% of the outstanding shares over the last year, are not the only positive aspect of the...