Good evening, Apple recently delivered a somewhat ho-hum earnings report. But there was one notable exception. The tech giant announced a massive $110 billion share buyback program. Not surprisingly, the stock shot higher after the announcement. Share buybacks are a common way for companies to reward shareholders. A company generally buys back its stock when it believes the market is undervaluing the stock at its current price. If you’re unfamiliar with stock buybacks, they are an example of how the principle of supply and demand impacts a stock’s price. When a company buys back its stock, the number of outstanding shares goes down while its earnings per share go up. When investors and analysts see earnings growth, they usually perceive that as a buy signal. All things being equal, share buybacks are a sign that a company is generating robust profits. And since holding that excess cash on its balance sheet is inefficient, companies choose to buy their own stock. But while stock buybacks have many benefits, they shouldn’t be the only reason you buy any stock. Sometimes, a company buys back shares because they have stopped growing. That’s not a formula for stock price appreciation. Ideally, you want to look for companies offering a buyback because they have excess cash after allowing appropriate capital expenditures (capex) to grow the business. You also want a buyback from a company with a history of delivering earnings and stock price growth that outpaces the market average. In this special presentation, we highlight seven stocks investors should consider buying after the company has announced stock buybacks in recent months. View the 7 of the Best Stocks for Share Buybacks Laycee Kluin
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