tag:blogger.com,1999:blog-8152901575140311047.post8564650248322230662..comments2024-03-29T07:41:47.433-04:00Comments on Musings on Markets: Buybacks and Stock Prices: Good or bad news?Aswath Damodaranhttp://www.blogger.com/profile/12021594649672906878noreply@blogger.comBlogger21125tag:blogger.com,1999:blog-8152901575140311047.post-44943429377828626092014-10-06T09:47:06.989-04:002014-10-06T09:47:06.989-04:00Dear Professor,
This post is one of your older p...Dear Professor, <br /><br />This post is one of your older post that I was referring to this morning and had a query regarding the interest earned on cash of $4 million in scenario 1. I wanted to know if this income would be taxable? If not,could you explain why not? <br /><br />Thanks <br /><br />Best <br /><br />PriyankAnonymoushttps://www.blogger.com/profile/00765046826430752258noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-58681098073786949052014-02-06T02:39:04.767-05:002014-02-06T02:39:04.767-05:00Whole Indian stock market is manupulated by few ha...Whole Indian stock market is manupulated by few handfuls of operator all the news are known to then earliar. <br /><a href="www.beststocktips.org/" rel="nofollow">best stock tips</a>best stock tipshttp://www.beststocktips.org/noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-21601362151442777292013-03-22T01:45:32.634-04:002013-03-22T01:45:32.634-04:00So great your article is! It hard to say how much ...So great your article is! It hard to say how much I have learnt from your article, such as your idea of life and love. I will recommend it to anyone.<br />Learn Stock Markethttp://www.sanasecurities.comnoreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-19122128528848835122013-03-19T02:59:20.444-04:002013-03-19T02:59:20.444-04:00Informative enhances my knowledge a lot..Informative enhances my knowledge a lot..Cashbackhttp://www.cashbackkorting.nlnoreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-19294641309062834292011-08-23T13:49:31.186-04:002011-08-23T13:49:31.186-04:00Dear Prof.
What about stock buybacks being a val...Dear Prof. <br /><br />What about stock buybacks being a value-destroying transaction (for most of the time)? Many CFOs lack Buffet's Midas touch and therefore pursue stock buybacks in good times (i.e. when their companies' stocks are highly priced and cash coming in). Accordingly, those companies' stoks are bought back at expensive prices. However, when the tide turns (as it always does), you wonder why those same executives start talking about doing a rights issue, which will inevitably be priced at a discount so as to attract investors back to the company. End of story: shouldn't a buyback be a proxy for "just sell the bloody stock for as much as you can while you still have the time"?<br /><br />Thanks and regards,<br />zola-cardoso<br />Lisbon, Portugalzola-cardosohttps://www.blogger.com/profile/02041674212385694989noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-69817595029300107552011-03-01T02:02:11.257-05:002011-03-01T02:02:11.257-05:00I assume that when you say that a company with poo...I assume that when you say that a company with poor returns should take on debt you mean that it should take on debt up until the point where it could safely handle the debt-load. If a company with a poor ROA or return on operations takes on debt to fund a share buyback it can quickly put itself at a very weak financial position and even collapse if returns are pressured for long enough. This is in conflict with your stance that a company with weak performance should take on debt. I assume that what makes this course of action a preferred one is the weak performance itself. But the weaker the performance the less the company can/should load up debt... Ultimately for firms with less than average profitability, the weaker the operating profits the less debt should be taken on.Unknownhttps://www.blogger.com/profile/16433884696681540308noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-24025737081928727262011-03-01T01:59:47.330-05:002011-03-01T01:59:47.330-05:00This comment has been removed by the author.Unknownhttps://www.blogger.com/profile/16433884696681540308noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-44042189165019005762011-02-05T04:51:19.763-05:002011-02-05T04:51:19.763-05:00Prof,
Is buyback a better option when faced with i...Prof,<br />Is buyback a better option when faced with inflation and return on cash < inflation rate?Unknownhttps://www.blogger.com/profile/07948499580003958515noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-929364454403411212011-02-05T04:49:38.969-05:002011-02-05T04:49:38.969-05:00This comment has been removed by the author.Unknownhttps://www.blogger.com/profile/07948499580003958515noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-45649994477815047872011-01-28T09:57:06.485-05:002011-01-28T09:57:06.485-05:00Prof, I admire your articles, My hats off to you f...Prof, I admire your articles, My hats off to you for sharing your opinion on the current aspects of the market.<br /><br />I would like to see your opinion on the current debate on 'US debt limit'. Will an increase in limit benefit the country? OR will it benefit only a few powerful groups ( in govt and wall street?)<br /><br />Please share your opinion and educate us..<br /><br />A concerned citizen..<br />(Concerned that educated people are letting down the country by not discussing/addressing the vital issues).Mikehttps://www.blogger.com/profile/07355513525615592382noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-66962968960079981132011-01-27T06:21:13.254-05:002011-01-27T06:21:13.254-05:00Respected sir
It quite some time since i read ...Respected sir<br /> It quite some time since i read you. Am from india, and i would like you to bring a article comparing vis-a-vis investment in stock markets,commodity markets,currency markets and in bank's deposits.<br /><br /> It will be of very useful to novice people like me if u can post it with examples. Much anticipated.<br /><br />Thanks<br /><br />H.Venkat...Unknownhttps://www.blogger.com/profile/05434191692193311277noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-78915265942432699942011-01-27T06:12:30.601-05:002011-01-27T06:12:30.601-05:00Seekingdelta,
Very impressive. Thank you for sendi...Seekingdelta,<br />Very impressive. Thank you for sending me the link!Aswath Damodaranhttps://www.blogger.com/profile/12021594649672906878noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-3827982669790602942011-01-27T00:21:44.802-05:002011-01-27T00:21:44.802-05:00Hi Prof Damodaran.
Using the data you generously ...Hi Prof Damodaran.<br /><br />Using the data you generously provide on your NYU page I created a World Market Valuation Heat Map. It can be accessed at the following link.<br /><br />http://seekingdelta.wordpress.com/2011/01/26/world-market-valuation-heat-map/<br /><br />Thought you may want to check it out.<br /><br />Keep up the good work.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-6236119932151042942011-01-26T19:18:47.283-05:002011-01-26T19:18:47.283-05:00Prof, I once again express my appreciation for sha...Prof, I once again express my appreciation for sharing your thoughts on the markets.<br /><br />Here is one for you. I have been reading articles on the high valuation of Netflix (NFLX). I would love to read your take on its valuation.Mikehttps://www.blogger.com/profile/07355513525615592382noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-48784366717089000132011-01-26T14:44:59.102-05:002011-01-26T14:44:59.102-05:00one other explanation for why cash might be discou...one other explanation for why cash might be discounted is investor fear that the mgmt team might blow it on something dumb or unknown so buying back stock eliminates that riskUnknownhttps://www.blogger.com/profile/10188636158957731336noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-71441285201605775422011-01-26T08:26:43.817-05:002011-01-26T08:26:43.817-05:00A stock buyback when your stock is under valued ma...A stock buyback when your stock is under valued makes sense. Warren Buffet can pull it off, given his history of being right on valuations. Do you trust your average CFO to make the same judgment?Aswath Damodaranhttps://www.blogger.com/profile/12021594649672906878noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-18131413200291280072011-01-26T00:12:14.683-05:002011-01-26T00:12:14.683-05:00Warren Buffett on stock buybacks: “I think if you...Warren Buffett on stock buybacks: “I think if your stock is undervalued, significantly undervalued, management should look at that as an alternative to every other activity.”<br /><br />In the simplest sense, if an investment in my own company gives me a higher return than my cost of capital, and a better return than other projects or m&a activity, doesn't it make sense?Unknownhttps://www.blogger.com/profile/07085193789674135641noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-5392371150620361362011-01-26T00:09:40.713-05:002011-01-26T00:09:40.713-05:00This comment has been removed by the author.arielhttps://www.blogger.com/profile/00816161940800029297noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-56016887777208262192011-01-25T17:12:52.128-05:002011-01-25T17:12:52.128-05:00Very informative.
Thank you professor.Very informative.<br /><br />Thank you professor.Mikehttps://www.blogger.com/profile/07355513525615592382noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-1722978906460851022011-01-25T14:36:30.767-05:002011-01-25T14:36:30.767-05:00Fair enough. But I think the more general discussi...Fair enough. But I think the more general discussion I have below should suffice to capture both your concerns. If you feel that cash is being discounted either because of tax issues or bad management, then do stock buy backs...Aswath Damodaranhttps://www.blogger.com/profile/12021594649672906878noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-60594316220893356932011-01-25T14:12:05.235-05:002011-01-25T14:12:05.235-05:00Your rational market example does not account for ...Your rational market example does not account for taxes. Taxes are the major reason why the Modigliani-Miller theorem may not hold. For instance, in your case, interest on the cash is taxed twice, once at the corporate level and once at the shareholder level. If the sum of those taxes for the marginal shareholder is higher than the tax incurred on the cash if the shareholder has the cash, the buyback should increase the value of the company. This would be the case if the marginal shareholder is a pension fund or a fund manager with primarily 401(k) investors.<br /><br />Also, if investors fear the the money will be spent "foolishly" by management (e.g., a CEO-pay enhancing but shareholder damaging acquisition), giving the cash back may relieve that fear and cause the stock price to rise.Highgammahttps://www.blogger.com/profile/15938202656495837461noreply@blogger.com