Director share purchase or buyback

[ken]

Well, they may be right. The Dow up and the rest follows.

Just to quote :

" You are neither right or wrong because the crowd agree or disagree with you. You are right because your data and reasoning are right.

In the short run, it is a measuring machine and in the long run, it is a weighing machine."

We do investments is to make money.
Relax and enjoy.

[hyom]

The US market had the highest stock buyback in its history in 2007. 2007 marked the peak of the bull market which started in Mar 2003. How big was the share buyback? Over USD1 trillion. To put this amount into perspective, this amount exceeds total dividends paid and approximates almost two-thirds of net income in 2007. Executives overpaid for their own companies on a massive scale. The timing was just as bad. One year after this record stock buyback, we witnessed the worst-ever financial crisis in 2008 since the Great Depression with stock prices dropping like a stone. Stock buybacks do not have a good track record of making money for shareholders.

http://www.scribd.com/doc/76156705/BuyBa...mpensation

There is a big difference between company executives using their own money(Director's purchases) and shareholders' money(share buyback) to buy back shares. For optimum allocation of money spent, using our own money to benefit ourselves(Director's purchases) always beat using other people's money to benefit other people(share buyback). In fact, plenty of people with fiduciary duties end up using other people's money to benefit themselves. A relevant example in this context is the preference among executives vested with lots of stock options to use stock buybacks rather than dividends to return money to shareholders.

The timing of the share buyback can coincide with the executives selling of their stock options. Initiate stock buyback at the right time and use shareholders' money to buy executives' options at a high price. Stock buybacks pushes up the share price whereas when dividends go XD, the share price drops. Bad for executives vested with stock options.

In the old WallStraits days, there was a debate between forummers led by Curtis and d.o.g over whether dividends or share buyback is better. Events in 2007 has proven d.o.g right.

[Jared Seah]

What is right today could be wrong tomorrow...

I personally prefer money in my pocket than "promised money" in the bush.

Some may say but Warren, the cherry coke drinker, prefers his companies reinvest the cash and don't pay dividends. How?

Eh... Warren buy companies (and he can hire and fire the CEOs). I buy a digital signature somewhere in CDP. The companies I invested in never even send me a digital email wishing me Merry Christmas!? Investor Relations?

LOL!

[dzwm87]

hyom: i read a same article illustrating what you have mentioned. Like I mentioned elsewhere, a good businessman may not be a good investor and vice versa. Share buyback should be taken as a reinforcement indicator but NOT a starting indicator of value purchase.

Jared: you are right! somehow, the notion of "buying a share like you're buying a piece of business" is only partially right.. it should be "buying a share like you're buying a piece of business as a minority investor"