FR1,
Do you happen to have a URL for the buybacks? Here's a view as to their importance:
businessweek.com
<Snip> Share Repurchases When a company's execs have a lot of cash on hand and think their stock is inordinately cheap, buying back stock from the public market and then retiring it is an easy way to lift the price. This became very popular in the '90s, as more and more executives saw increasing shareholder value as their primary responsibility. My most vivid memory of this was during the 1997 global-markets crisis. For four days in a row, I watched the world's markets slip by the hour. But the bottom only appeared when GE (GE ) announced it would start buying back shares on the open market. The move knocked enough sense into the heads of money managers for them to start buying, too, and the U.S. market quickly stabilized. Then the other markets began to turn around as well -- all within an hour of GE's announcement.
Unfortunately, no one has yet played the role of GE in today's market. The numbers, from Thomson Financial Securities Data, paint a bleak picture. From the beginning of 1999 to Feb. 26 of that year, there were 232 buyback announcements, worth a total of $26.9 billion. Over the same period in 2000, the stream of buybacks stayed respectable: 158 announcements, worth a huge $44.6 billion. Now, the flow has all but stopped: During the same period in 2001, only 81 announcements, worth $15.2 billion, have been made.
Share buybacks aren't a perfect measure of market sentiment. A recent study done by University of Texas finance professor James Westphal showed that of the shares companies say they'll buy back, only 60% are actually repurchased. That means either the stock price soared, negating the need for a buyback, or the company was less than candid about its plans and may have hoped the announcement alone would boost its shares.
That's why I'm wary of using buybacks to value individual stocks. But I think it's a great tool for measuring what executives of companies -- the people who know their business the best -- really think of their stock's price. And according to the numbers for the past two months, they don't think very highly of it.
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Comments welcomed!
Best, Ray :) |
