Thanks for your reply, Jim. My comments in Msg #764 were intended to relate to the general market and not just to COST in specific.
Still, I think you're going a bit off the path in relating stock buybacks to institutional selling. Institutions buy or sell for whatever reasons they have, but the major factors are these:
Value - stock is very cheap based on fundamental analysis (buy) or reaches a target determined by fundamental analysis (sell).
Change in company outlook (but stock buyback won't contribute here).
Change in industry outlook.
News or earnings surprises.
Buy or sell signal from computer modeling (includes, but not limited to, standard technical analysis).
Management changes.
Decision by institution's advisory committee to reweight general portfolio.
More aggressive or defensive view of the market as a whole.
A company's stock buyback decision would be, at best, a minor blip on the institution buy/sell analysis. Perhaps if there are five pounds of 'buy' factors balancing five pounds of 'sell' factors, then two ounces worth of stock buyback factor could tilt the scales -- but overall it's minor.
Finally, you mention that COST is talking about using the stock as an incentive to employees as if that's a particularly negative aspect. Almost every proxy I've ever seen talks about stock option programs as an incentive to management or other employees. Many times, shareholders are asked to authorize a company to issue more shares expressly for this purpose. This is a dilution of shareholder equity. But in today's world, it's a very ordinary event. Don't take it negatively.
Thanks, Jim, for your added comments. |
