This brings up an interesting philosophical question that may be important for you – the investor – to answer. In fact, Ben Graham posed it over seventy years ago in Security Analysis. Namely, does the Board of Directors and management have an obligation to seek to create a fair price for their common stock so that those who need to sell shares for living expenses, etc., have the opportunity to sell at a price that reflect the intrinsic value of their holdings? If the answer is yes, then it is not right for management to buy back stock to take advantage of low prices as they are essentially favoring one group of shareholders (sophisticated business-minded men and women who have the accounting background necessary to see when a stock is undervalued and have the financial resources to hold on, or even buy more, when the stock crashes) over another (regular working folks who don’t have a lot of extra liquidity around and are investing to improve their standard of living). Unfortunately, only you can answer that question.
In the end, I’m certainly pleased with the large gains generated by my Yankee Candle holdings. I can’t help but lament fortune lost, however, when I stop to consider how those shares could have compounded over the next decade. Who knows? The market is odd; maybe the price will fall back to where it was (indeed, the stock seems to be giving back some of those gains as existing shareholders take their profits). If anything, this serves to prove that opportunities on Wall Street are ephemeral. That’s why it is important for enterprising investors to have the funds to take advantage of them immediately because when they appear, they aren’t likely to stick around for long.
