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Politics : The Trump Presidency -- Ignore unavailable to you. Want to Upgrade?

To: zzpat who wrote (33626)	9/8/2017 10:48:19 AM
From: TimF	Read Replies (1) \| Respond to of 364291

We can test if a buyback is working right? Not easily. You can't run a controlled experiment with the buyback and without it for the same company at the same time with the same conditions. You can survey post buyback results, but the companies deciding to do buybacks and those not doing buybacks will be different companies with different circumstances. And not just different in random ways (which could be dealt with merely by looking at a large enough sample). Also what "working" is could mean different things. Wall Mart began a $20 billion stock buyback in 2015. MarketWatch Did the buyback raise the market cap? Macrotrends As you can see the stock was pummeled during this time. The buyback failed. That's not enough. To say definitively that it failed you would have to see the results in another universe where the company didn't do a buyback. Or you would have to find some other way to see that the market cap would have been higher without the buyback. And if the market cap, has to be worse after and because of the buyback, if it was the same as it would have been without the buyback that isn't necessarily a failure. If at the time there wasn't a good internal investment available, then a buyback will help the current shareholders that want to get out, and it will make the share count lower (than it would have been without the buyback, not necessarily lower overall since employee stock options and other issues can add to the float) and help increase future price increases when and if conditions and profitability improve. If there was a good internal investment opportunity and the company missed it, well missing it and instead using the money for a buyback might be a bad idea, what you would call failure. But the real failure was missing the opportunity, not the buyback. If instead of the buyback they sat on the cash, or instituted or increased a regular dividend, or issued a one time special dividend, or made some not particularly good external investment, or even made an internal investment but the wrong one, they still would have missed out on the opportunity.