Troy Loney wrote:I'd say maybe flooded with excess cash and inflated equity values...so a bubble maybe? Our stock is trading around $60 right now, but a lot of analysts have the true value at more around $70. So I feel like it's altleast not a bubble in the financial sector.
Also, I heard an interesting segment on the radio that said a lot of companies, who are flush with cash have been using that money to buy back equity. So I'm thinking that could inflate stock prices, but at the same time wouldn't that be a legit market demand and a positive upward push on prices...not just inflation?
Inflate stock prices? To me companies buying back their stock is a sign that they think their stock is undervalued.
JeffDFD wrote:Yeah, a company buying back stock also increases EPS for the stock left out there (that you would have). Don't see where a company buying back stock is bad.
In theory, it's true that Stock repurchases are a positive sign that an "ongoing concern" believies it's stock is cheap relative to other financial instruments.
In practice, companies are notoriously horrible at timing those repurchases.
Having said that, many companies (particularly the Fortune 500) are currently able to float bond issues at rates that are less than those on 10 year Treasuries. That's a very rare and unique opportunity. In such a case it often makes sense for those organizations to actually float a bond issue and use the proceeds to buy back equity.
I think the current stock repurchases are more a result of the lack of other uses for cashflow (Investing back in their business - dicey in a low growth economy such as ours, or Bonds - currently at 'all time' lows, increasing dividends - which organizations must be careful to insure that those dividends are sustainable, or in acquistions), than any real belief that those equities are undervalued.
JMHO. (As always, Past performance is not an indication...)