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Stock buybacks surge: But who gets the biggest bang for the buck?

  • Goldman Sachs sees S&P 500 stock buyback reaching $650B this year, topping 2007's previous record, according to its portfolio strategy team.
  • As a percentage of market cap, buybacks are near an eight-year low and still under "normalized" levels, Goldman analysts Jessica Binder Graham and Christopher Wolf write in "The Buyback Comeback: Assessing the Efficacy of the Spend." The report focuses on three measures of efficacy:
  1. Share-count reducers: Cutting share counts boosts EPS. Companies that have cut their outstanding share count by at least 25% over the last five years include (AIG -0.9%), (GLW -1%) and (LYB -3.2%); in addition (AAPL +0.6%), (KR), and (AVGO +2.7%) are expected to reduce share counts by 10% or more over the next two years.
  2. High buyback capture: (BBY -2.1%), (ETFC -1.2%), and (AMAT +0.5%) top the list of those generating the largest "capture", meaning the difference between internal rate of return of a company's buyback vs. an uninformed strategy of straight-lined stock repurchases.
  3. Value investors: (FBHS +0.4%), (ISRG -0.8%), and (KMX +1%) are among those that are best at "buying low," measured by negative correlation between share price and buyback activity.
  4. ETFs: PKW, SYLD, TTFS, SPYB, TTAC

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American International Group, Inc.