tag:blogger.com,1999:blog-8152901575140311047.post2866845232098037376..comments2024-03-19T05:19:06.448-04:00Comments on Musings on Markets: The Shift to Buybacks: Implications for investorsAswath Damodaranhttp://www.blogger.com/profile/12021594649672906878noreply@blogger.comBlogger12125tag:blogger.com,1999:blog-8152901575140311047.post-51664951406766471052011-02-23T15:00:14.494-05:002011-02-23T15:00:14.494-05:00can you point me to a couple of papers that look a...can you point me to a couple of papers that look at the stock performance after buybacks?Unknownhttps://www.blogger.com/profile/10649935651237198784noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-60707268799186536822011-02-20T15:26:31.604-05:002011-02-20T15:26:31.604-05:00Sorry it took me so long to get back to you but my...Sorry it took me so long to get back to you but my source for buybacks is S&P..Aswath Damodaranhttps://www.blogger.com/profile/12021594649672906878noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-55588018475952863512011-02-18T16:24:44.521-05:002011-02-18T16:24:44.521-05:00Professor,
On your Jan. 2009 S&P 500 "Au...Professor,<br /><br />On your Jan. 2009 S&P 500 "Augmented Model" which accounts for dividends as well as buybacks, what source did you use to obtain the 2008 (TTM) of buybacks?<br /><br />Also, do you simply use the same projected growth rate for your buyback or do you calculate as a % of dividends? <br /><br />Thanks!Druckeritehttps://www.blogger.com/profile/00979725178175437923noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-17676477965962931772011-02-15T00:23:53.405-05:002011-02-15T00:23:53.405-05:00>both conventional print media and data service...>both conventional print media and data services seem to pay little heed to buybacks<br /><br />I suppose this situation is going to change soon, because media try to follow trends, so they'll pay more attention to buybacks<br /><br />>buyback is a good idea if the shares are undervalued and a bad idea if they are overvalued. Unfortunately, most managements tend to be better operators than capital allocators so they tend to buy in stock at the wrong time.<br /><br />This is an old idea. Warren Buffett wrote this in his "Essays on Investing" many years ago. It's a good way to evaluate company's managers intelligence and "honesty"Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-76883082560488798852011-02-08T12:41:21.084-05:002011-02-08T12:41:21.084-05:00I think Steve Wynn had an extremely savy response ...I think Steve Wynn had an extremely savy response and approach to buybacks:<br /><br />[Responding to a question as to why Wynn issued equity at $154 at the end of September and then paid a dividend of $6/share on December 10th. Note that Wynn shares had traded in the $80s in June of last year and at $120 yesterday.]<br /><br /> "It is the job, and you can take this as a final statement on the subject going forward. It is the job of board of directors and especially of the CEO to take advantage of the market when that market movement is extreme. When a company increases its value by 100% in 60 days, that’s an unnatural movement of value and the market also goes the other way sometimes. These unnatural movements in value, no company gets to be worth twice as much in 60 days as it was before to any intelligent person, so when that happens, we take advantage of it. If everybody is so hungry for shares, we let them have some. If the shares go down, we buy them. And that, that is a statement of policy in this company, period."<br /><br />Otherwise, when I worked as a credit banker, we helped firms raise debt to fund buybacks, up-to and through 2006. In hindsight, levering-up for a non-"productive" investment at the height of a bubble was not such a bright idea...Unknownhttps://www.blogger.com/profile/16424730357173860333noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-53545222486833982542011-02-04T08:57:09.305-05:002011-02-04T08:57:09.305-05:00.. it is clear that companies have no idea what th...<i>.. it is clear that companies have no idea what they are doing. They seem to buy back far more stock when prices are high than when they are low. </i><br /><br />Looks like it is a case of the agency problem.<br />Due to the buyback, if the stock price rises, they will gain(stock options); if the stock price falls, they might allot themselves more options.Mikehttps://www.blogger.com/profile/07355513525615592382noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-11515820701537384582011-02-03T18:08:28.279-05:002011-02-03T18:08:28.279-05:00Depends on where they get the money to do these bu...Depends on where they get the money to do these buybacks, right?Aswath Damodaranhttps://www.blogger.com/profile/12021594649672906878noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-70639328330009472952011-02-03T11:56:07.755-05:002011-02-03T11:56:07.755-05:00If you take stock buybacks to an extreme, manageme...If you take stock buybacks to an extreme, management would essentially be purchasing the company's entire share base.<br /><br />E.g. if the company boughtback sufficient shares so that only 100 holders remained (1 share each), then they would be holding a stock with a pretty high price. I think owning 1% of an S&P500 company would be pretty nice.<br /><br />Is this a valid way of looking at it?Mario Vhttps://www.blogger.com/profile/07056325322260572981noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-3224644663930861532011-02-03T11:05:22.827-05:002011-02-03T11:05:22.827-05:00Adrian,
Fair enough. If that is the primary ration...Adrian,<br />Fair enough. If that is the primary rationale, though, it is clear that companies have no idea what they are doing. They seem to buy back far more stock when prices are high than when they are low. And I agree with you... Managers at not very good at assessing the value of their own stock. Perhaps, it is difficult for them to be objective.Aswath Damodaranhttps://www.blogger.com/profile/12021594649672906878noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-73801831721612970672011-02-03T10:56:50.582-05:002011-02-03T10:56:50.582-05:00For what it's worth, I think a lot of the deba...For what it's worth, I think a lot of the debate on buying in stock misses the forest from the trees. Quite simply, a buyback is a good idea if the shares are undervalued and a bad idea if they are overvalued. Unfortunately, most managements tend to be better operators than capital allocators so they tend to buy in stock at the wrong time. I believe generally though that a buyback at a cheap price is superior to a dividend because of the tax ramifications of dividends... - Adrian MeliAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-75595845611848827662011-02-03T10:27:49.154-05:002011-02-03T10:27:49.154-05:00Professor, do you have your own article or some re...Professor, do you have your own article or some recommendation about an impact of new share issues (with various price levels) on stock price of the company. You talked about an impact of decreasing of the number of shares of a company, but what about an opposite example? Thx very much in advance...Unknownhttps://www.blogger.com/profile/17350198275170373812noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-996582432652054452011-02-02T13:41:15.785-05:002011-02-02T13:41:15.785-05:00Prof.
Most US companies are so hung when it come...Prof. <br /><br />Most US companies are so hung when it comes to payouts, many resort to debt, which I think is quite silly. I question the wisdom of not only the company, importantly the lender as well! <br /><br />Interesting topic you have elaborated on, I have been following the chain, I want your thoughts on how much investor psyche / sentiments play a role when it comes to a decision of skipping dividends. <br /><br />Thanks again, KrishnanKrishnanhttps://www.blogger.com/profile/01096917726465877552noreply@blogger.com