Categorized | Credit, Stock Trading Tips

7 Debt-Free Companies Doing Big Stock Buybacks

7 Debt-Free Companies Doing Big Stock Buybacks

Securities and Exchange Commissioner Robert Jackson Jr. gave a speech June 11 in Washington D.C. In it, he outlined the reasons why the securities watchdog is overhauling the rules for stock buybacks; the first time in 15 years.

To understand what’s happening in this area, Jackson’s office looked more closely at 385 stock buybacks over the last fifteen months. A big red flag according to Jackson is that a lot of executives use stock buybacks as a way for them to take profits.

“What did surprise us, however, was how commonplace it is for executives to use buybacks as a chance to cash out. In half of the buybacks we studied, at least one executive sold shares in the month following the buyback announcement,” Jackson told the audience. “In fact, twice as many companies have insiders selling in the eight days after a buyback announcement as sell on an ordinary day. So right after the company tells the market that the stock is cheap, executives overwhelmingly decide to sell.”

It’s a big reason why I’ve never been a fan of stock buybacks.

With nine years into a bull market and interest rates rising, you would think companies would be doing fewer stock buybacks, but the opposite is happening.

So, if you’re going to invest in stocks doing big stock buybacks, at least consider these seven debt-free companies because they’re using free cash flow, not debt, to make the purchases.

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