Stock Buybacks?  Opinions?

Stock Buybacks? Opinions?

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Re; you would rather have dividends
  #11  
Old 09-30-2018, 08:55 AM
thetruth thetruth is offline
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Default Re; you would rather have dividends

As to whether to increase dividends or do a share buy back.
First thing you need to realize is that the company is not run for or by you. You get the right to vote your shares. First few people do but you can bet the large share holders do.
You hold say 100 shares of xyz stock and you vote your shares not to increse the salary of the CEO. OK. Likely the CEO ownes a huge number of shares-far more than you do.
On top of that he/she likely got many of their shares NOT PAID FOR, as management incentives-stock awards.

If, you need or want dividends, or any othr investment goal you should regularly review the stocks you hold and decide if they still fit your needs and goals. Several obvious examples
KODAK has gone out of business. Polaroid-has gone out of business.GE is currently worth less than half of what it once was. Due to GOVERNMENT action-interest rates on CDs and bonds and TAXES, we have little choice but to invest in the stock market and for some real estate. How quickly we have forgotten lessons of only ten years ago.
Stocks and real estate do not only go up.
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  #12  
Old 09-30-2018, 09:47 AM
tophcfa tophcfa is offline
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Public companies have a fiduciary duty to maximize vale to the owners of the company (the stock holders). When a company has excess cash they basically have five options. 1) Increase their cash reserves for future opportunities (usually not the option of choice), 2) re-invest the money into the company if management views future return on investment opportunities favorably (typically done with growth versus mature companies), 3) use the money for mergers/acquisitions if they believe opportunities exist that will enhance shareholder value, 4) to pay out dividends to shareholders (typically more common with mature versus growth companies), 5) to buy back outstanding shares of stock (typically done when management believes the stock is undervalued or when the other options are less likely to maximize shareholder value). Another factor to consider (always follow managements financial incentive) is how management is compensated. Management is often paid huge annual bonuses based on a companies short term performance, including stock price, and is often paid in shares of stock. Re-investing in future growth is a longer term strategy to maximize value, while stock buy back programs are a short term strategy. Selling a stock after a jump in price following a buy back program can be a good idea as it is often a sign of weak future growth prospects.

I share the view of other posters in this thread that the market is currently overvalued and that it is at risk of multiple very dangerous bubbles popping. Has anyone read the book the Aftershock Investor, written by Weidemer and Spitzer? Very scary and hard to argue with. Our federal deficit and associated debt, which continues to grow rapidly, is the most toxic of all bubbles.
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  #13  
Old 09-30-2018, 11:06 AM
rivaridger1 rivaridger1 is offline
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Excess cash in the companies' coffers is the reason for buy backs. I'd prefer the management of any company either invest the cash to expand existing operations if a healthy ROI ( return on investment ) is available , invest in R&D to develop new organic opportunities, or thoroughly explore " Merger and Acquisitions " possibilities even if it means management will have to go by the wayside. The cash should be put to use to generate a return greater then available by simply investing same.
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  #14  
Old 10-01-2018, 08:47 AM
Floridian4 Floridian4 is offline
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I agree, I am pretty conservative as well; Apple, VISA, etc., however I went to a workshop at Schwab in the Villages a year or so ago and really enjoyed it. Does your brokerage offer anything like that?
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  #15  
Old 10-01-2018, 10:48 AM
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manaboutown manaboutown is offline
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It depends. Sometimes it is in the best interest of the company and the shareholders such as when the company's stock price is relatively low. However when buybacks occur at peak market prices they may be improvident.

As a shareholder I am happy to see Berkshire Hathaway buying back some stock at this point in time.
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  #16  
Old 12-07-2018, 12:34 PM
Boomer Boomer is offline
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I think the pre-crisis DJIA high was in October of 2007.

The big fall was in 2008.

This bull market is usually measured from March 2009.

As the market led up to the fiasco of 2008, I remember thinking that the housing boom was a house of cards. It got downright stupid.

(And then everybody in high places seemed so surprised. I have never understood how some old high school teacher in the Midwest could see it coming but they did not.)

I am not claiming to be some kind of savant or to have any qualifications whatsoever. But for what it is worth, I think our long bull market, post-corporate tax cuts, has been basically a bull$#*% market.

I have a long held comfort zone with making my own market decisions. But I strongly believe that unrestrained greed is not good for the economy.

Back to the thoughts on stock buybacks: I still don't like 'em.

And I sure don't see this current market offering me any buying opportunities. (euphemistically speaking)

Anybody else keeping an eye on the old bull? Thoughts?

Last edited by Boomer; 12-10-2018 at 11:50 AM. Reason: typos
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  #17  
Old 12-07-2018, 01:04 PM
Paper1 Paper1 is offline
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Quote:
Originally Posted by Boomer View Post
. . .
Stock buybacks fueled by adding to the national debt sure do feel good if your investments are growing and money is rolling in. One must keep in mind that when the music stops you might not have a chair to sit in.
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  #18  
Old 12-07-2018, 01:16 PM
Boomer Boomer is offline
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Quote:
Originally Posted by Paper1 View Post
Stock buybacks fueled by adding to the national debt sure do feel good if your investments are growing and money is rolling in. One must keep in mind that when the music stops you might not have a chair to sit in.
Paper1,

Musical chairs. What a perfect analogy.

I always talk about building and tending a moat, but I like your comparison better, even though we are saying the same thing.

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  #19  
Old 12-10-2018, 01:57 PM
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ColdNoMore ColdNoMore is offline
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Quote:
Originally Posted by Boomer View Post
I think the pre-crisis DJIA high was in October of 2007.

The big fall was in 2008.

This bull market is usually measured from March 2009.

As the market led up to the fiasco of 2008, I remember thinking that the housing boom was a house of cards. It got downright stupid.

(And then everybody in high places seemed so surprised. I have never understood how some old high school teacher in the Midwest could see it coming but they did not.)

I am not claiming to be some kind of savant or to have any qualifications whatsoever. But for what it is worth, I think our long bull market, post-corporate tax cuts, has been basically a bull$#*% market.

I have a long held comfort zone with making my own market decisions. But I strongly believe that unrestrained greed is not good for the economy.

Back to the thoughts on stock buybacks: I still don't like 'em.

And I sure don't see this current market offering me any buying opportunities. (euphemistically speaking)

Anybody else keeping an eye on the old bull? Thoughts?
Too many to cover in one post, but here's a few...of my own observations/opinions.

1. I'm an 'Oracle of Omaha' disciple and believe in holding for the long haul...even though it can be tough on the ticker in the short run. After seeing an almost 2-1/2 times increase in the DJIA between the low of early 2009 and 2016...I'm glad I hung on.

2. I too am against stock buy-backs, even when they personally benefit me...as I think they are bad for our country in the long run. Particularly, since the current system rewards upper management for a short period of their company's stock price and almost compels them to do whatever is good in the short run...as then they can make their killing now if they're later replaced. The old "instant gratification/I got mine, forget you" attitude...if you will.

If laws required their remuneration/pay package to be based on say a three year average, we might see actions being taken that strengthen the economy/company...for a longer period of time.

3. Since just a little over 1/2 of Americans even own stocks, the idea that those who benefit the most from tax cuts, or loose corporate regulations, allowing companies to increase their profits for the short term will eventually allow some bread crumbs to 'trickle down'...I find ludicrous.

https://www.politifact.com/california/statements/2018/sep/18/ro-khanna/what-percentage-americans-own-stocks/

Quote:
And in 2017, Gallup found that 54 percent of respondents owned stocks either directly or as part of a fund.

To be precise, a narrow majority of Americans does own stocks, according to credible recent studies. But Khanna has a point that Americans of modest incomes are significantly less invested in the stock market than wealthier Americans are. Other large groups, including minorities and those without a college education, also lag in stock ownership, meaning that the stock rally is largely passing them by.
4. Recent tax cuts; Too political to address, but so far...I'm certainly not seeing what the proponents were touting.


Even with the recent market(s) volatility, I'll still sit tight and just keep telling myself that..."I don't lose anything, if I don't sell."


Sadly, not everyone has that luxury.
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Last edited by ColdNoMore; 12-10-2018 at 05:35 PM.
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  #20  
Old 12-10-2018, 02:19 PM
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Quote:
Originally Posted by blueash View Post
The surge in stock buy-backs is in very large part due to a choice being made by corporations with what to do with their tax break money.

Federal corporate tax receipts fell from an annualized level of $409 billion in Q1 2017 to $269 billion in Q1 2018, a direct result of the Trump tax cuts

The promise was this cash would boost workers' income and be invested in innovation and machinery.



Corporations had prior to the enactment of the huge tax break made very clear that they intended to use the money for stock buy-backs and debt relief, not to help workers or invest. See here and here.

But the short term stock holder does not benefit from long term investment and the corporation is there to serve its stockholders which of course includes the board of directors. So use the cash to buy your own stock, this raises the "value" of the stock but does nothing for the worker or the long term success of the business.
Yep.
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