How good are stock buybacks as indicators? According to Standard and Poors, stock repurchases among firms in its 500 index climbed 80% in the first quarter from a year earlier. That could be a bullish sign for retirement investors, because it may mean companies are feeling good enough about the economy that they feel their stocks are currently discounted.
The biggest buyers were IBM (IBM), at $4 billion worth. IBM was about $128 Thursday versus a 52-week low of $99.50.
Wal-Mart Stores (WMT) spent $2.97 billion on its own shares. It traded Thursday at about $50. Its 52-week low was $47.35.
And ExxonMobil (XOM) bought back $2.56 billion. It traded at about $60 Thursday, with a 52-week low of $58.46.
But the buybacks appear to be “just enough shares to satisfy their employee options, and therefore negate any earnings dilution that would occur from new shares being issued,” blogged Howard Silverblatt, Standard & Poor’s senior index analyst for its Index Services unit.
In other words, these stock buybacks from IBM, Walmart and Exxon could be killing two birds with one stone.
The buybacks were three times larger before the financial crisis of 2008 years ago, Silverblatt points out — $172 billion – and we are “seeing the impact of those buybacks in lower share counts, which in turn increased the earnings per share.”
As of this writing, Wayne Faulkner did not own a position in any of the stocks named here.
