5 Highly Efficient Companies Buying Back Their Own Stock

Inexperienced investors are often so wrapped up in the potential upside of their holdings that they completely forget about the downside, or what might go wrong. But you won't see pros making one rookie mistake.

In terms of strategy, this means that the pros take the polar opposite approach to the newbies: They spend a good deal more time weighing the factors that may drag down their investments than daydreaming about how they're going to spend their profits.

One good way to protect your downside is to invest in companies that have a buyback program in place. These companies can invest in themselves by purchasing their own shares on the open market, thereby reducing the supply of shares and boosting prices for existing stock.

If management is willing to buy back shares, they clearly think the stock is undervalued. Plus, no matter how much the stock falls, they will always be buyers, limiting the downside.

Check out this list of companies that have recently announced buyback plans and are more efficient than their industry competitors. We determined efficiency according to the following criteria:

• Trailing-12-Month (TTM) Revenue Per Employee: A company's sales over the past year in relation to the number of employees. The higher the ratio, the more efficient the company.
• Receivables Turnover: A measure of a firm's effectiveness in extending credit and collecting debts.
• Asset Turnover Ratios: Amount of sales generated for every dollar of assets.

Industry comparison data sourced from Reuters.com. For an interactive version of this report, click here.

Interactive Chart: Press Play to see how analyst ratings on these stocks have changed over the last two years.

Kapitall's Eben Esterhuizen and Alicia Sellitti do not own shares of any company mentioned.