Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Bob Rudd who wrote (6481)	3/30/1999 5:51:00 PM
From: sjemmeri	Respond to of 78496

Depends on relationship of price to book, right?

To: Bob Rudd who wrote (6481)	3/30/1999 6:41:00 PM
From: Freedom Fighter	Read Replies (1) \| Respond to of 78496

Bob, >>I'm not certain, but I think buying back stock, a practice which is increasingly displacing dividends, actually lowers book value.<< If done from free cash flow it will have the effect of raising book value per share. A simple model: Assuming no reinvestment of earnings and all repurchases, we would have the same net worth divided by fewer shares. However, we now have a lot of companies borrowing money and repurchasing shares at a substantial premium to book in addition to using free cash to do the same. This lowers book value per share and often raises EPS. IBM is doing this at present and Campbells is another that did it. There are many other examples. Wayne