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.
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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.
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.
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.
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.
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.)
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