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Market Extra: Why the buyback frenzy may be bad for U.S. stock investors

The U.S. stock market is near record levels, and U.S. companies have been spending a record amount repurchasing their own stock. Yet investors should be cautious about connecting the two.

While stock-buyback programs are often touted as a way for a company to improve its share price, this trend hasn’t panned out when you look at market data, according to a report by TrimTabs Asset Management.

“Many of the companies that have bought their stock back have underperformed the market,” said the report, co-written by Ted Theodore, the chief investment officer of TrimTabs. “And that is not just in the recent six months or so — for more than the last three years, an index focused on companies with a strong history of buying back their own stock has underperformed.

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