A buyback is itself a special kind of acquisition, made at prices that are typically a bargain compared with those a company must pay for an outside purchase.
Sentiment: NEGATIVE
Some managements do not even think of buybacks as an option. The idea of shrinking their equity base repels them. Their inclination instead is to get bigger, and this often leads them to pay rich prices for acquisitions that never earn their keep.
There are several things that can create an alpha - stock buybacks are one. High dividend yields are another, especially nowadays because the stock market yields more than the banks and the tenure treasury. But by and large, it tends to be companies with a strong cash flow, rising sales, accelerated earnings, a profit margin expansion.
If a company's stock is undervalued - as many managers believe theirs is - a repurchase may offer the best payoff of all.
Short sellers sell stock they have borrowed, hoping to buy it back later when its price has fallen.
My own belief is that people can come back from anything. It doesn't mean that it won't come at a huge cost.
I don't like stock buybacks. I think if a company has the money to buy their stock back, then they should take that and increase the dividends. Send it back to the stockholder. Let them invest their money again from the dividends.
Human nature says that you want a bargain, whether you want the goods or not. You think that something is a steal, you'll buy it.
Companies are bought for their revenue, customer base, technology, or people. A few great companies offer all of these, but any valuable business offers one.
You can't get into the trap of paying for customer acquisition.
Unlike other loans, a reverse mortgage doesn't have to be repaid until the borrower moves out of the home or passes away.
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