Hi Chuzz,
Still do not know why to this day everyone gets hyped up
about stock splits.
1. Stocks splits do nothing to shareholder value or
I would split my companies stock every week if I could.
2.From my research I have read academic are studies that show a *slight* upward bias for stocks that split, but nothing significant.
Even if it was significant, it would cancel itself out over
time like the January effect with efficient markets.
3. A company buying its stock back is CLEARLY bullish on
the future of the company. Not to say that factors could
arise that make Dell have slow pc sells, but the company has "faith"
in the future.
4. If I am in charge of Dell and have all this excess cash,
I have 3 options basically.
a) Invest in money market (t-bills) and not risk the cash.
B) Invest in say a stock portfolio index fund to try and
beat t-bills. Or real estate, etc..
C) Take a huge risk and bet it on stock in the company.
Think of Dell being an individual investor and betting it
all on one stock.
Thus risk/reward spectrum is there for Dell. Time will tell
if buying back shares was a good idea. If Dell keeps surging,
the value of the company (assets) will increase, if Dell
declines, then the value will decrease for shareholders.
BUT, for sure this will make the eps calculations more attractive
since there are less shares outstanding.... This is clearly
great for stock investors in DEll, cause EPS will go up, all
else being constant.......
Thoughts??
Jim |
