Buybacks ( General News )

[winston]

Proof that share buybacks are propping up the stock market…

Standard & Poor’s 500 Index constituents are poised to repurchase as much as $165 billion of stock this quarter, approaching a record reached in 2007.

The buying contrasts with rampant selling by clients of mutual and exchange-traded funds, who after pulling $40 billion since January are on pace for one of the biggest quarterly withdrawals ever.

Source: Bloomberg

http://thecrux.com/theres-only-one-buye ... ket-alive/

[winston]

Here’s Who’s Really Behind Wall Street’s $2.4 Trillion Buyback Scam

By Shah Gilani

Source: Wall Street Insights and Indictments

http://wallstreetinsightsandindictments ... back-scam/

[winston]

Buyback Blackout Leaves U.S. Stocks on Own Prior to Earnings

by Oliver Renick

U.S. stocks are entering part of the year when one of their biggest support systems is turned off.

Buybacks, which reached a monthly record in February and have surged so much they make up about 2 percent of daily volume, are customarily suspended during the five weeks before companies report quarterly results, according to Goldman Sachs Group Inc. With the busiest part of first-quarter earnings seasons beginning in April, the blackout is getting started now.

Source: Bloomberg

http://www.bloomberg.com/news/articles/ ... e-earnings

[winston]

What Do Share Buybacks Really Tell Us About the Stock Market?

by Ben Carlson

Chief executive officers, who just announced the biggest round of monthly repurchases ever, executed about $550 billion of buybacks last year, according to data compiled by S&P Dow Jones Indices.

That compares with a net $85 billion of deposits by customers of mutual and exchange-traded funds, the biggest gap since 2012, data compiled by Bloomberg and Investment Company Institute show.

If you sell a share of stock in the U.S. market, there’s a fair chance the buyer is the company that issued it — and it’s buyers who’ve been on the right side of the trade since 2009.

Buybacks are helping prop up a bull market that is entering its seventh year just as investors bail out and head back to bonds.

Source: A Wealth of Common Sense

http://awealthofcommonsense.com/2016/04 ... ck-market/

[winston]

Why stock buybacks often end up disappointing

By Mark Fahey

Source: CNBC

http://finance.yahoo.com/news/why-stock ... 28900.html

[winston]

Don’t Let CEOs Manage Your Money

by Marc Lichtenfeld

In many instances, the stock repurchases are simply to offset options or stock-based compensation.

For example, a company may award 1 million shares to employees during the year - then buy back 1 million shares so that the share count doesn’t increase.

Of course, when the buyback is announced, the company won’t tell you it was to counter the new shares that were awarded. They just portray themselves as heroes for buying back shares.

Based on this, you might think that companies that buy back shares perform better. But the data shows that stock buybacks don’t result in outperformance.

Large stock buybacks don’t really improve stock performance. At least they don’t increase the odds of beating the broad market.

Perhaps the results would have been even worse without the share repurchases. But you can clearly see that buying back stock does not lead to outperformance.

Source: The Oxford Club

http://www.investmentu.com/article/deta ... x1bmvl96M8

[winston]

Bull Market Losing Biggest Ally as Buybacks Fall Most Since 2009

by Lu Wang

Announced buybacks slumped 38% to $244 billion from a year ago

Macro uncertainty and banks’ absence contributed to decline

Source: Bloomberg

http://www.bloomberg.com/news/articles/ ... since-2009

[winston]

The Market’s Last Line of Defense Is Crumbling

By John Del Vecchio

Two things about human nature are pretty predictable. The first is that humans have short memories. Second, they never learn from their mistakes.

The same goes for investors. Markets change, the companies that dominate the markets change, technology changes, but human nature never changes.

Not that long ago we experienced a huge financial crisis where many people watched their 401(k) turn into a 201(k). While the markets rebounded to new highs in recent years, a lot of individual investors sold at the bottom and never got back in. Others who did, won’t know to sell until it’s too late.

Meanwhile, central banks have fueled yet another bubble. This one could be even bigger than the last, meaning that when it bursts, it will burst more violently. Carnage will ensue, and some companies will be more devastated than others.

That’s why I focus so much of my energy looking at earnings quality.

In my newsletter Forensic Investor, I publish stock recommendations betting against companies that use accounting shenanigans – basically, companies that have jimmied their earnings. Often, companies will resort to this funny business to mask deterioration in their business. I also design, develop, and test models to help spot financial chicanery and predict where earnings could be vulnerable to manipulation.

The problem today is that the whole market may be manipulated.

More and more companies use these “adjusted earnings” to report their financial results. They often exclude all sorts of stuff from the numbers to make them look a lot better than they actually are.

Measures like EBITDA for example (or “earnings before interest, tax, depreciation and amortization) mask material weaknesses in the financials. Warren Buffet calls it: “earnings before the bad stuff.”

But the biggest prop to the market may be share buybacks.

Now, normally I’d say that buying back stock isn’t the kind of earnings manipulation trick that would cause the share price to sink. The share count is at the bottom of the income statement, and many other line items exist that management can use to generate income.

As an example, it’s far juicier if the company were cooking the books on the revenue line and overstating the demand for its product. That’s the sort of fancy maneuvering that causes a stock to implode.

But, we are not in normal times. The buybacks have gone berserk.

In fact, research from Wall Street’s biggest institutions suggests that almost all of the returns since 2009 have been driven by share buybacks.

I don’t believe that’s ever been the case before. That’s scary. But what’s scarier is knowing that after seven years, this bull market is very long in the tooth. Those buybacks have been propping up the market, stretching the cycle to the max. Take them away, and the entire market may collapse with them.

Take a look at the chart below:

See larger image

Just prior to the last crisis, buybacks surged. Then the market tanked, and share buybacks dried up during the best buying opportunity in a generation. Now that the market has rallied sharply since 2009, buybacks have accelerated again and are at all-time highs.

But, it may have topped out. Buybacks have started to fall off sharply in 2016. According to research from TrimTabs, buyback announcements are running 35% below the pace of last year.

And just over the past five weeks, the value of shares bought back have fallen 42% year-over-year.

This could really lead to trouble for the markets.

What’s more is that those numbers would look worse if you removed Apple and Allergan, which accounted for 54% of the volume.

But that’s not even the worst of it. Where it gets really ugly is that a lot of companies accumulated boatloads of debt to fund the buybacks.

In the end, they’ll have balance sheets bogged down with leverage, and a bunch of wasted cash that was used to buy back stock at inflated prices. Little to none of that cash was spent investing in projects that could fuel future growth.

This could be creating a perfect storm that leads to much lower equity prices in 2016.

But it could also present one of the greatest opportunities to profit for regular investors like you.

It’s based on the same strategy I’ve used to manage my hedge funds through the last two market crashes. The deluge that will result from these buybacks not could, but will present another major opportunity to profit on the downside.

That’s why now more than ever you need to actually look at what’s going on behind the numbers companies are reporting with their earnings.

We’ve had two major scares in the market over the past nine months. I don’t think it’s going to get any better than it is right now, and the next correction could be the big one.

Source: Forensic Investor

[winston]

Record stock buybacks are likely to continue

By Rick Newman

For the last four quarters, ending in March, big companies spent $589.4 billion buying back their own stock, the most ever for any 12-month period.

Buybacks in the first quarter of 2016 alone totaled $161.4 billion, the second-highest quarterly total since 2007, when the market peaked right before a punishing recession began.

The five companies executing the largest stock buybacks in the first quarter were Gilead Sciences (GILD), Apple (AAPL), General Electric (GE), Pfizer (PFE) and McDonald’s (MCD).

S&P 500 firms now have $1.3 trillion in cash on their books, also a new record high.

Source: Yahoo Finance

http://finance.yahoo.com/news/record-st ... 11152.html

[winston]

Share buybacks at lowest point in four years

by Ed Arnold

The value of share repurchases for U.S. companies reached a four-year low, according to data from TrimTabs Investment Research as sited by Reuters.

According to TrimTab's data, about $1.8 billion per day was spent on share buybacks over the second quarter of this year. That would make the quarter the lowest since 2012. And, TrimTabs says that the total number of companies announcing share buyback programs is declining as well.

The second quarter average of 3.3 buybacks per day so far is well below 6.1 per day over the same quarter last year. Share repurchases have been a strong factor in driving up the value of the stock market over the past four years.

For the last several years, public companies flush with cash have regularly dumped it into share buyback programs. Some of Memphis' largest companies, in particular AutoZone (NYSE: AZO), have been using the strategy to pump up their share values for several years. In March, AutoZone announced that it was adding another $750 million to its share buyback fund. In the third quarter of 2016, AutoZone bought back 687,000 share of its stock at $775 per share, spending about $533 million on itself.

AutoZone repurchased 687 thousand shares of its common stock for $533 million during the third quarter, at an average price of $775 per share. At the end of the third quarter, the company had $765 million remaining under its current share repurchase authorization. AutoZone is an old hand at share repurchases. It began its share buyback program in 1998, and since then, the company's board has authorized more than $16.4 billion in its own shares.

In January, FedExCorp.'s (NYSE: FDX) board announced its new share repurchase program, aiming to buy back up to 25 million shares of common stock. At the time, there were 272 million shares of stock outstanding.

“Since FY14, we have returned nearly $8 billion to shareowners through the repurchase of over 57 million shares, and we remain committed to delivering long-term value for shareowners,” said Fred Smith, chairman, founder and CEO of FedEx Corp., when the program was announced. “Our profit and cash flow performance is strong, and we will continue to fund substantial investments in the business.”

At least one Memphis company has slowed its repurchases this year. In the sixth month period ending on June 30, International Paper (NYSE: IP) spent $132 million on share buybacks. Over the same period last year, the company had spent $353 million on its own shares.

Source: Biz Journals

http://www.bizjournals.com/memphis/news ... yptr=yahoo