Armanino foods -- the buy back ends

At the end of March, Armanino Foods of Distinction (symbol AMNF on the Pink sheets) announced that it had completed its buy back program by making a purchase of a one million share block from an unaffiliated holder. This purchase coupled with the other over 300,000 shares purchased by the company on the open market fulfilled the plan to repurchase one million dollars worth of common stock. So what has been the effect?

One thing is very clear: liquidity has dried up. In six of the last nine trading days (about since the company stopped buying on the open market) daily volume has been 6600 shares or less; only once in that period did volume exceed twenty thousand shares. From the start of the year until March 29th, however, there had only been two days with volume below 6600 shares and 42 days with volume in excess of 20,000 shares. Indeed, the stock seems to be returning to its old trading patterns. Volume has always been greatest after earnings announcements or changes to the dividend; in the middle of the period between such announcements, it volume falls to a trickle.

The question then arises whether it might be time to sell and take profits in AMNF. My answer is a clear no! As a pink sheet stock, information available on Armanino is not as abundant as with some other stock. Nevertheless, there are certain recent facts that indicate good things on the horizon for AMNF. The main reason is the completion of the stock buy back itself. As the press release made clear, the company tapped its credit line to make this purchase. Armanino has a very conservative management. If there were any storm clouds on the horizon, it would be very unlike that management to borrow to buy back stock. Management could simply have continued to buy small amounts on the open market out of cash flow or even stopped the purchases altogether in order to conserve cash. Further, since the repurchase was made at the very end of the first quarter, it is a good indicator that the results for that quarter will be good. Armanino's management would not be likely to make such a large share buy if it knew that the release of the first quarter results was likely to cause a decline in the share price. Quite to the contrary, management would most likely want to complete the purchase before the announcement of results if those results were likely to cause the share price to increase.

Admittedly, some of you may thik that this reasoning sounds like the reading of tea leaves. Nevertheless, in my opinion, the omens and portents all line up for a continued rise in the price of the stock.

DISCLOSURE: I remain long shares of Armanino; it is one of the largest holdings in the portfolio.