Stock buybacks are when corporations use their cash to buy the stock. Basically, boasting earning per share and easing the float of outstanding shares. It makes the company look better particularly if its EPS is absurdly high. The most positive way to view this is that when a company produces more cash than it can actively invest in productivity it will damped volatility buy initiating a buyback scheme. This is a great strategy for growth companies in which stock price gains are still high. If you are in a more conservative growth sector one might pay dividends while having more modest stock price gains. Here is the critical or bear attitude towards the type of buybacks that have been going on. Companies like FANG make up a significant percentage of gains in the exchange buyback their own shares because they have free supply of debt free cash.
Jim Cramer of CNBC gets credit for coining the term FANG: Facebook Inc Amazon.com, Netflix, and Google, the digital artists now known as Alphabet Inc.
…Since then Alphabet has more than doubled, Amazon is up over 250% and Facebook and Netflix have gone up over 400%.
The total market cap of these four stocks is now $1.55 trillion.
These companies borrow, do not have to meet any rational model of earnings and usually executives get bonuses derived from stock performance. It makes sense to see this continuous drive of capital being used to boost stock price. Does it mean that these are artificially high? Does it mean that they along with their hedge fund, banker friends are supporting the market? It would seem to be hinting that way because we know that most of the populace, or people do not have much excess money. They are busy spending it not multiplying it.
These stocks do a couple things: one they serve to sell you things both by ideology and consumerism; and they are data collectors analyzing, spying and reporting on you. These approaches to business are horrible things for society, which despite them being profitable, is why I have no interest in promoting them.