Wednesday, March 27, 2013

Buy Backs

A Buy Back is when a company uses spare cash to buy its own shares on the open market. I do not like buy backs and never have. I do not see that it particularly helps the shareholders of the company. I do not think that company's buy backs buy shares at good prices. I think that this does not enhance the value of a company and I wish that companies would not do this.

Here is an article on why Buy Backs are not a greatidea. He hits are keys points about how this can destroy shareholder value and why it is not necessarily the best use of a company's money.

There is also an article by The Wall Street Journal. It talks about why Best Buy's stock Buy Backs has not always been the best idea. This journalist thought paying down Best Buy's debt would be a much better idea.

You have to wonder if the companies are doing Buy Backs more because it seems to be currently fashionable rather than because it is a good idea.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.

1 comment:

  1. A lot of stock buybacks are just a waste of money. Unlike dividend payouts stock buybacks do not create and economic impact.