Of course, the "Share Repurchase" may drive the share price up, but that doesn't always increase "EPS".
One of the reasons for that might be "all those stock options" that the top executive officers are getting. The shares that a company is issuing for compensating the top executives may be the shares that company is buying back in many cases. Which means, it may drive the stock price up (with a publicity), but not necessarily increase the EPS. Also some companies are borrowing money (because the interest rate is very low these days) to buy back their own stocks, not with their earnings. In fact, earnings forecast for this year for many companies in S&P 500 were not increasing at all if not decreasing.
I guess, It's a trend these days, that top executives prefer to be compensated with stock options instead of a big salary because their salary will be taxed at much higher rate than the incomes they get from their stock options. As an example, Steve Jobs have been getting a salary of $1 for so many years because he didn't believe in Government and Taxes. To me that is totally insane! This type of a distorted view of capitalism will eventually destroy the idea of capitalism which I love its principle. The capitalism, when exercised in an ideal way, should make everybody do well, not just top 1%. So why is it not working well these days? "GREED !". Historical ratio of compensation between the average worker's vs. top executives was around 1 to 20. What's the ratio these days? 1 to several hundreds if not thousands.
The wealth distribution over the period of last decade shows exactly what I mentioned above: "Wealth of average american were stagnant while wealth of those top 1% tripled during this period". How long can this type of capitalism will sustain? I still think the idea of capitalism is great, but without average worker's consumption grow by their discretionary income growth, the invested capital may not work well. It will work better with two way principle, not one way! "GIVE and TAKE".
Oh, btw, I hope everybody is doing well on managing your TSP accounts. I've been away for a while and just came back home, deleting so many emails mercilessly...LoL. Then, I noticed this email trail and feel like I wanted share my thoughts. Anyway, folks, do not be too complacent about the market. It does work both way also. What goes up fast, eventually will come down fast also. So just be careful and be ready to preserve your hard earned capital! Just my two cents worth...
On Fri, Mar 27, 2015 at 11:49 AM, Ralph Architzel rarch71@gmail.com [TSP_Strategy] <TSP_Strategy@yahoogroups.com> wrote:
Furthermore, I would be interested in whether such share repurchase activity can be reliably used as a trade signal? Or is the situation that once we (the public) learn about it the timing is too late to gain an edge from this information?On Fri, Mar 27, 2015 at 9:21 AM, rc.livtaride@mindspring.com [TSP_Strategy] <TSP_Strategy@yahoogroups.com> wrote:As Sarah stated not everyone on here understands and I appreciate her explaining these posts. Thanks for all your help Sarah!!!
-----Original Message-----
From: "Matt Lowery mattlowery@yahoo.com [TSP_Strategy]"
Sent: Mar 27, 2015 8:15 AM
To: "TSP_Strategy@yahoogroups.com"
Subject: Re: [TSP_Strategy] Re: Fwd: New York Post: Stock market rigging is no longer a 'conspiracy theory'
We understand the definition of share repurchase.However, to indicate that is the only reason for purchasing one's own shares wouldn't be completely honest. At the time of hire, execs are given options regardless of performance of the company at that specific point in time. A condition of exercising the options would be a strike based on EPS.Therefore, another reason for repurchase is to drive the EPS upwards.
Sent from my iPhone
On Mar 27, 2015, at 12:05 PM, sarah_oz@yahoo.com [TSP_Strategy] <TSP_Strategy@yahoogroups.com> wrote:Executives of companies purchase shares of those companies when they think they are in for a tumble? Usually they purchase them AFTER they tumble and expect them to rise.
DEFINITION of 'Share Repurchase'
A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. Share repurchase is usually an indication that the company's management thinks the shares are undervalued. The company can buy shares directly from the market or offer its shareholder the option to tender their shares directly to the company at a fixed price.
INVESTOPEDIA EXPLAINS 'Share Repurchase'
Because a share repurchase reduces the number of shares outstanding (i.e. supply), it increases earnings per share and tends to elevate the market value of the remaining shares. When a company does repurchase shares, it will usually say something along the lines of, "We find no better investment than our own company."
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Posted by: Paul <ur12bfriend@gmail.com>
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Neither the TSP Strategy group, nor individual members, are licensed or authorized to provide investment advice. Any statements made herein merely reflect the personal opinions of the individual group member. Please make your own investment decisions based upon your personal circumstances.
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