Empire Co, the buyer of Safeway's (NYSE: SWY ) Canadian property, saw its stock jump 11% in early trading the day after the sale. Meanwhile, Safeway's stock was up 10%, on the announcement of the $5.7 billion deal. All in all, not a bad setup for investors.
The only downside, from my viewpoint, is that the cash from the sale isn't going to help Safeway make much of its American operation. The company stated that the proceeds would be used to pay down debt, buy back shares, and -- if there was anything left -- maybe invest in the business. Who's to say?
The folly of the buyback
Look, we all get it. If a company buys its outstanding shares, then there's more apportioned to the remaining investors. If I divide income by the number of shares -- calculating the company's most quoted statistic, EPS -- I can bump the result up by increasing the income, or by decreasing the number of shares. Companies are quickly discovering that the income bit is hard, but buying shares is easy.
Hot Canadian Stocks To Invest In 2014: Ixia(XXIA)
Ixia supplies converged network and application performance testing solutions in the United States and internationally. It designs and validates a range of Internet protocol (IP) and third generation/long-term evolution networking equipment. The company?s solutions generate realistic traffic to stress routers, switches, and converged network appliances. It provides converged IP test systems and services for wireless and wired infrastructures and services. Ixia serves network equipment manufacturers, service providers, enterprises, and government agencies. The company was founded in 1997 and is headquartered in Calabasas, California.
Hot Canadian Stocks To Invest In 2014: Companhia Brasileira de Distribuicao (CBD)
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10 Best Biotech Stocks To Watch Right Now: MHI Hospitality Corporation(MDH)
MHI Hospitality Corporation, a real estate investment trust (REIT), engages in the ownership and operation of upper upscale and midscale hotels in the mid-Atlantic and southeastern United States. As of March 15, 2006, the company operated seven upper upscale and midscale hotels with 1,673 rooms under the brand names ?Hilton? and ?Holiday Inn?. It also owns leasehold interests in the commercial spaces of the Shell Island Resort, a condominium resort property. The company has elected to be treated as a REIT for federal income tax purposes. As a REIT, it would not be subject to federal income tax, provided it distributes at least 90% of its taxable income to its shareholders. MHI Hospitality has strategic alliance agreement with MHI Hotels Services LLC. The company was founded in 1957 and is based in Williamsburg, Virginia.
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