The Canadian Investor Are Buybacks Distorting Stock Prices?
Jul 1, 2024
They debate how speaking in absolutes blinds investors and why thinking probabilistically is safer. Discussion of blackout windows and whether buybacks are inflating stock prices and market demand. Analysis of where huge buyback flows came from and the risks if they fade. A quick look at a Canadian reservoir modeling software company and other names added to a watchlist.
AI Snips
Chapters
Books
Transcript
Episode notes
Buyback Impact Exceeds Simple Market Cap Share
- Buybacks can equal a few percent of total market cap but represent a larger share of actual yearly buying.
- Estimates vary widely and some claim buyback-driven demand could be very high for specific years.
Use Share-Count Reduction To Find Compounders
- Screen for firms that consistently reduce share counts to find buyback-driven compounders.
- Simon found 48 global firms with ≥5% CAGR share-count reduction and strong long-term returns.
Big Cash Flows Force Buyback Decisions
- High and steady buybacks often indicate mature, cash-generative businesses with limited reinvestment paths.
- Companies like Apple face the question of how to deploy enormous recurring free cash flow.
