Generally speaking when a corporation thinks the best use of their surplus cash is to bu back shares, then the executives have implicitly decided there is no real way to enhance the business' performance... given the UK dismal productivity development over the last decade, and the general problems of oligopoly in so many sectors, the continued rise in share buybacks in indicative of a country's business sector without ideas.... no wonder growth is in the doldrums!
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Dave Mc
In response to this post@ChrisMayLA6 the act of buybacks isn't good. But if a company owns a significant proportion of its own shares, might it potentially look to invest cash in long term improvements, think about employees and not be so beholden to the short-term-ism of each year's dividend payout? Or is that just wishful thinking?
@guigsy
the latter, I'm afraid...
by Emeritus Prof Christopher May ;
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h4890
In response to this post@ChrisMayLA6 What sectors are oligopolies and is it possible to invest in the companies in them?
If I would compare with sweden, banks are a oligopoly, give generous dividends, and grow at about the same rate as the market as a whole. One year on bank does a bit better by lowering interest rates, and the next year it was another one that lowered them most.
Very comfortable as investments unless you need spectacular gains.
@h4890
I'd say pretty much every major market segment in the UK is likely an oligopoly; if that's your investment strategy you'd be spoilt for choice - do you have a preferred sector?
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James T Monkey
In response to this post@ChrisMayLA6 For a company where growth has plateaued, buybacks provide an exit path for shareholders and increase the value of remaining shares, reducing the chances of a mass sell-off and corporate collapse, while being private allows them to focus on things other than satisfying shareholders with eternal growth.
@teamonkey
Hmmmm.... I think that would be a rather optimistic view - more likely as execs have share/nonus packages, its often about grabbing that money themselves, and once taken more private, surely the remaining shareholders have more leverage as they have a bigger impact on the price unless *all* shares are bought back?
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AndyDearden
In response to this post@ChrisMayLA6 But what percentage of FTSE companies (or more specifically the companies doing the buyback) are actually conducting their primary trading/production in the UK? GDP or GNP?
@AndyDeardentsa
Good Q.; not sure.... but the share will not have shifted much over the period in which buy-backs doubled, so its not entirely spurious data
by Emeritus Prof Christopher May ;
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John_Loader
In response to this post@ChrisMayLA6 the inflation+3.9% used by BT in it's billing is the same. Why bother becoming more efficient when we get a rise above inflation every year
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