Stock Buybacks: A Mountain or a Molehill?

Find out what is the big deal with stock buybacks and why companies prefer them

February 2022

Stock Buybacks: A Mountain or a Molehill? – There has been a lot said and written about stock buybacks (share repurchases) in recent times, especially after the record-breaking numbers that it put up in 2018. The people who support stock buybacks claim that it ensures the company uses its capital prudently and effectively. However, the opponents of stock buybacks claim that it is another example of short-term thinking by corporations.

Stock Buybacks: A Mountain or a Molehill?

Nevertheless, the figures don’t lie, and a record $807 billion was spent on stock buybacks in 2018, which was an increase of nearly 56% from the previous year. It captured the imagination of everyone, including investors, political figures, and the media. However, not everyone reported on it favorably, and even though it worked out for some investors, others lost money due to stock buyback programs.

So, the question is are stock buybacks a blessing or a curse for the economy? On the one hand, they help a company drive its share value and ensure that they reward its investors. However, it also means that the company has fewer funds to invest in newer products and hiring employees. How does a company achieve growth if it is spending most of its revenue on stock buybacks? There is no simple answer to that question because each company has different prerogatives and goals to achieve.

Making Sense of Stock Buybacks for Companies

The one thing that most people agree upon is that stock buybacks are not a big issue for companies who have the funds to spend on repurchasing their shares. The problem only arises when a company borrows funds from financial institutions and then uses them on stock buyback programs. The critics of stock buybacks claim that this short-term thinking by corporations will hurt the economy, as there will be less focus placed on launching new products in the market.

Are Stock Buybacks Good for the Economy?

Stock Buybacks Good or Bad? They definitely have a ripple effect on the economy, which will slowly stagnate as corporations accumulate debt to finance their stock repurchases. There is no denying that buybacks could be a major threat to the economy. Still, stock buyback supporters claim that the problem is being inflated by political figures painting an apocalyptic picture to gain support.

There is still debate surrounding the real value of stock buybacks, and whether the supporters or critics are right remains to be seen. Currently, investors and corporations are reaping the benefits of stock buybacks, and the recent trend is set to continue well into the 21st century. What the future holds for stock buybacks is anyone’s guess right now.

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About the Author & How YOU Can Profit:  This article is the copyrighted product of the team at BuybackAnalytics.com  .

Buyback Analytics is a Top Tier Investing Platform to help investors find, analyze, and profit from investing opportunities not found through traditional investment tools. We specialize in this simple concept:  Follow the trades of Insiders – CONSISTENTLY PROFITABLE Traders, Investors, and Institutions:

LEGAL Insider Trading / Inside Trades (CEOs, CFOs, Corporation’s Accountants & Attorneys, Politicians, etc.)
Stock Buybacks / Share Repurchases by Public Corporations (ie. Apple, Tesla, Netflix, Meta [aka Facebook], Microsoft, etc.)
Market Moving Institutions (Examples: Market Makers, Investment Banks, Stock Brokerages, Hedge Funds, etc.)

Use of Our articles: You are welcome to benefit from lots of FREE articles that you can read and learn from on our website blog.  You are also welcome to share or post this information as helpful content to your website or blog audience as long as the article, and this entire byline are left intact, word for word.  If you would like us to provide you with more, or bulk content for your blog or website to educate your audience on basic to expert financial and investor information & techniques, feel free to contact us at info@buybackanalytics.com .

Are Stock Buybacks a Good Thing or Not?

Find out whether stock buybacks are in your favor or not

February 2022

Are Stock Buybacks A Good Thing or Not? – When looking at the stock buyback figures, an investor can quickly recognize that the number of companies involved in this practice has increased. You don’t need to look at a business report to recognize that in 2021 the number of stock buybacks by companies has increased tenfold over the last decade. The reasons are simple, companies who have cash on hand realize that the best way to invest is to instigate a stock buyback program.

Are Stock Buybacks A Good Thing or Not for Companies?

Nowadays, more companies are interested in stock buybacks than investing in the future. Organizations want to improve their earnings per share and their stock value at the same time while affording their shareholders with maximum returns on their investment. However, there are also critics of stock buybacks who complain that companies inflate their stock values to profit.

There is some truth to those allegations as organizations that want to improve their quarterly earnings, and EPS numbers are looking towards stock buybacks. The question investors must ask themselves is whether the company’s motives are genuine, and should they invest in a company that holds frequent stock buybacks? The answer is double-edged because, on the one hand, stock buybacks increase stock value and earnings per share.

Are Stock Buybacks Good for Investors?

However, on the other hand, they don’t represent the complete picture to investors. A company may only look towards a stock buyback program because it wants to paint a good picture artificially. The company may also be looking to prevent a hostile takeover, so it is trying to buy back its shares. Even small organizations are now jumping on board the bandwagon, and this has caused a familiar debate to resurface, are stock buybacks a good thing or not?

Look Beneath the Surface of Stock Buybacks

The primary concern that investors have with stock buybacks is that an increasing number of companies are shifting away from investing in their future and are only after short-term gains. That is a dangerous path to follow for any organization, as sooner or later, it will come back to haunt them. Therefore, investors must look beneath the surface of buybacks and make up their minds regarding whether stock buybacks hold value for them or not.

Are Stock Buybacks A Good Thing or Not 2022 Buyback Analytics - BuyBack Analytics
Are Stock Buybacks A Good Thing or Not? – Buyback Analytics Provides the Data You Need to Answer the Question: Are Stock Buybacks Good or Bad?

Are Stock Buybacks Good or Bad?

Stock buybacks help reduce the number of shares in the market, creating a demand for such shares. That is one way of artificially increasing a company’s stock price, even if the company isn’t in a financially strong position. That presents a challenge for investors since they don’t see the complete picture and, therefore, can’t make a judgment call on whether to invest in that company’s stock.

Are Stock Buybacks A Good Thing or Not?

If you look at the current trend in the marketplace, you will find that almost every other company is involved in stock buybacks these days. The simple fact of the matter is that company’s want to reward their shareholders, and stock buybacks provide them with the best solution.

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About the Author:  This article is the copyrighted product of the team at BuyBackAnalytics.com  .

Buyback Analytics is a Top Tier Investing Platform to help investors find, analyze, and profit from investing opportunities not found through traditional investment tools. We specialize in this simple concept:  Follow the trades of Insiders – CONSISTENTLY SUCCESSFUL, PROFITABLE Traders, Investors, and Institutions:

LEGAL Insider Trading (CEOs, CFOs, Corporation’s Accountants & Attorneys, Politicians, etc.)
Stock Buybacks (Share Repurchases) of Public Corporations (ie. Apple, Tesla, Netflix, Meta (Facebook), Microsoft, etc.)
Market Moving Institutions (Examples: Market Makers, Investment Banks, Stock Brokerages, Hedge Funds, etc.)

Use of Our articles: You are welcome to benefit from lots of FREE articles that you can read and learn from on our website blog.  You are also welcome to share or post this information as helpful content to your website or blog audience as long as the article, and this entire byline are left intact, word for word.  If you would like us to provide you with more, or bulk content for your blog or website to educate your audience on basic to expert financial and investor information & techniques, feel free to contact us at info@buybackanalytics.com .

The Power of Share Repurchases

Find out the value of share repurchases for companies

UPDATED: March 2022

The Power of Share Repurchases – Purchasing stocks of companies in the middle of repurchasing their shares is one of the most effective selection strategies for stocks. There is no denying that share repurchases hold immense value for shareholders, the company, and investors looking for new shares in the market. The power of share repurchases transcends all boundaries of the stock market as it gives value to everyone involved in the process. The benefits of this process have made share repurchases attractive to many companies today.

The Power of Share Repurchases

Even though you should look how to invest in companies repurchasing their shares, there are times where you should avoid making a potentially harmful investment. You can never fully tell what the reasons behind the share repurchase had been for the company. You should consider several factors to evaluate whether an investment makes sense for you. That will allow you to develop a strategy that reaps results and rewards for you in the long run.

Why Companies Repurchase Shares?

Several reasons might prompt a company or firm to repurchase its shares in the market. The most obvious one would be that they think their shares are undervalued. However, there are other motives for companies to repurchase shares. These include the following:

* Buy Stock Cheaply

The duration in which the company stock price is down is considered the best time for repurchasing shares, which allows the company to drive the price up. It also sends investors the message that the company’s management thinks that the stock has been trading less than the intrinsic value in the marketplace. Hence, you should look for companies involved in stock buyback programs to drive their share price higher as an investor.

* Offset Dilution of Company Stock

Most companies reward their employees by allowing them to purchase shares instead of offering them dividend payments. Therefore, a share repurchase may be taking place to dilute the outstanding shares in the market and reward employees at the same time. It doesn’t mean that the stock is undervalued, but that the company is compensating its workforce.

* Manage or Boost Earnings Per Share (EPS)

Share repurchases are also used for managing and boosting the company’s earnings per share (EPS). This metric is valuable to corporate executives and investors since they are the ones who will reap the benefits when the company earnings are high. Companies used stock buyback programs to control the number of shares and drive the earnings per share value higher.

Conclusion – The Power of Share Repurchases

As an investor interested in buying stocks of companies involved in share repurchases, you need to look at the company’s real motives. There could be several reasons why a company has implemented a stock buyback program and understanding that will allow you to take advantage of the power of share repurchases.

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About the Author & How YOU Can Profit:  This article is the copyrighted product of the team at BuybackAnalytics.com  .

Buyback Analytics is a Top Tier Investing Platform to help investors find, analyze, and profit from investing opportunities not found through traditional investment tools. We specialize in this simple concept:  Follow the trades of Insiders – CONSISTENTLY PROFITABLE Traders, Investors, and Institutions because THEY get Inside Information that YOU don’t:

LEGAL Insider Trading / Inside Traders (CEOs, CFOs, Corporation’s Accountants & Attorneys, Politicians, etc.)
Stock Buybacks (Share Repurchases) by Public Corporations (ie. Apple, Tesla, Netflix, Meta (Facebook), Microsoft, etc.)
Market Moving Institutions (Examples: Market Makers, Investment Banks, Stock Brokerages, Hedge Funds, etc.)

Use of Our Articles: You are welcome to benefit from lots of FREE articles that you can read and learn from on our website blog.  You are also welcome to share or post this information as helpful content to your website or blog audience as long as the article, and this entire byline are left intact, word for word.  If you would like us to provide you with more, or bulk content for your blog or website to educate your audience on basic to expert financial and investor information & techniques, feel free to contact us at info@buybackanalytics.com .

3 Myths About How Share Buybacks Affect Stock Performance

The myths surrounding share buyback and their impact on the market

UPDATED: March 2022

3 Myths About How Share Buybacks Affect Stock Performance – For the past few years, companies in the United States have been on a share repurchase spree. This has raised concerns that the current high levels of the stock market are being driven by the appetite of businesses for their stocks. A share buyback-driven stock market may seem vulnerable, but companies have good reasons to buy back their shares. That’s because share buybacks offer companies a suitable way for returning profits to shareholders.

3 Myths About How Share Buybacks Affect Stock Performance

They also manage to boost share prices as demand outnumbers supply and reduces the total number of outstanding shares. The profits are then divided, which increases earnings per share (EPS) and makes the company more attractive for investors. Like other characteristics of stocks, share buybacks can be a major factor for exploiting the stock market to beat long-term returns.

Many investors have concerns about the high numbers of stock repurchases, which have resulted in a lot of misinformation being shared. We will look at 3 of the most concerning myths that have risen and debunk them here for you.

1. Myths About Share Buybacks – Share Buybacks ONLY Represent Short-Term Thinking

The critics of share buybacks claim that companies who buy back their stock are only thinking about short-term gains. That’s mainly down to the fact that they use the cash that’s meant for investment and innovation. Even though share buybacks are high, a recent report from JP Morgan has shown that at 2% market capitalization of the S&P 500, they meet the average for the past 15 years.

The volume of share buybacks has risen, but that’s mainly because companies are making more money, which has raised market capitalization and stock prices. Businesses have also been using cash repatriated after-tax to repurchase stock.

2. Myths About Share Buybacks – Companies Are Never Making the Best Use of Capital

The truth is, even though share prices of stock that are repurchased are higher than their average historically, they are still cheaper than the prices in the market. You won’t get better returns if you are buying cheaply because, after the financial crisis of 2008, companies who bought shares back at discounted prices were lagging behind those who repurchased at higher prices.

Valuations are set by the investors, and deciding to buy back stock is mainly down to the company thinking that their stock offers better value than any investment opportunity at that stage.

3. Myths About Share Buybacks – Companies Always Raise their Debt to Buy Back Shares

This is another myth that stems from the fact that companies borrow funds for share buybacks and capital spending. This trend is expected to catch on, but investors aren’t concerned about this right now. That’s because companies who raise their debt to buy back stock aren’t punished, and they generate similar returns to companies with lower debts.

Conclusion to 3 Myths About How Share Buybacks Affect Stock Performance

Companies that have weak balance sheets have been outperforming those who have debts, and it’s mainly because investors have faith that the company will pay off their debts when their share prices improve after buybacks.

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About the Author & How YOU Can Profit:  This article is the copyrighted product of the team at BuybackAnalytics.com  .

Buyback Analytics is a Top Tier Investing Platform to help investors find, analyze, and profit from investing opportunities not found through traditional investment tools. We specialize in this simple concept:  Follow the trades of Insiders – CONSISTENTLY PROFITABLE Traders, Investors, and Institutions because THEY get Inside Information that YOU don’t:

LEGAL Insider Trading / Inside Traders (CEOs, CFOs, Corporation’s Accountants & Attorneys, Politicians, etc.)
Stock Buybacks (Share Repurchases) by Public Corporations (ie. Apple, Tesla, Netflix, Meta (Facebook), Microsoft, etc.)
Market Moving Institutions (Examples: Market Makers, Investment Banks, Stock Brokerages, Hedge Funds, etc.)

Use of Our Articles: You are welcome to benefit from lots of FREE articles that you can read and learn from on our website blog.  You are also welcome to share or post this information as helpful content to your website or blog audience as long as the article, and this entire byline are left intact, word for word.  If you would like us to provide you with more, or bulk content for your blog or website to educate your audience on basic to expert financial and investor information & techniques, feel free to contact us at info@buybackanalytics.com .