Our Buybacks are up 492.9% -- more
than 5X the gains of the S&P 500 – from 3/97 to 2/13!
- David R. Fried
“Buyback stocks” are companies that repurchase their own shares. Extensive investing experience and rigorous academic research prove conclusively that buyback stocks far outperform the broad markets … yet not one investor in a hundred takes advantage of the enormous profits they generate.
“Stock buybacks are the simplest and best way a company can reward its investors.” according to legendary investor Peter Lynch.
The prestigious Hulbert Financial Digest recognizes the logic of investing in buybacks. Our buyback stock newsletter, the Buyback Letter, was recently named to The Hulbert Financial Digest Investment Newsletter Honor Roll for the third year in a row, and
Hulbert gave it an “A” for clarity From its inception in March 1997, our 20-stock
Buyback Index® is up 492.9% vs. only 88.86% for the S&P 500.
The evidence that buyback stocks represent a superior investment over stock indices is overwhelming:
- A major 20-year study found that buyback stocks with high book-to-market ratios generated returns 388% higher than other stocks.
- Another study from Southern Illinois University found that stocks repurchased with insider buying beat others buy 29% over 4 years.
- A third study, by two prominent financial professors, showed that buyback stocks outperformed the market by 455% over a 10-year period.
- David Ikenberry, Dean of Leeds School of Business, reports that average
buybacks outperform the market for 4 years following announcement of the share repurchase program.
- From 1974 to 1983, the median total return of buybacks expressed as a
compounded annual average was 22.6% vs. 14.1% for the S&P 500. An investment of $10,000 for the 10 years in buybacks would have grown to $76,600 compared with only $37,400 for the S&P 500.
Perfectly legal "insider" information
Why do buyback stocks perform so well? At the Buyback Letter, it’s our position that buybacks are the only legal form of “insider information” available in today’s market. Here’s why:
Nobody knows more about a company’s prospects than the senior executives who run it. These company insiders would not authorize a repurchase program unless they were absolutely convinced that their share price was headed higher.
That’s why a repurchase announcement is such a strong “buy” signal. Peter Lynch said, “Insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise.”
And the buyback market is large: In 2011, the 500 companies in the S&P 500 spent $404.2 billion to buy back their own shares. In April 2013, Apple Inc. announced the largest buyback program in stock market history.
But be careful though: not all companies that announce stock repurchase programs actually see their share price rise. So how do we at the Buyback Letter consistently pick buyback winners – companies like U.S. Oncology, up 49.27% in 2 months … Pediatrix Medical Group, up 53.69% in 6 months … HerbaLife, up 172.32% in 18 months … and Joy Global, up 112.59% in 6 months?
Well, first we monitor the company to see that they follow through on the repurchase announcement and actually buy back their shares: many companies who announce buybacks do not. Then, we make sure the buyback is large enough to impact the value of the stock. And we look for companies that can fund their buybacks and any dividends they pay from operations. Also, debt to equity ratio should indicate that they are not leveraged.
The bottom line: the five Buyback Letter Indexed Portfolios have gained an average of 352.7% since inception in March 1997. That’s nearly 4X greater than the 88.86% total return of the S&P 500 during that same period.
Our Buyback portfolios make money for investors, and with a FREE 30-day trial subscription to the Buyback Letter, you can confidently and reliably make money from the market’s best-performing buybacks too. To activate you FREE 30-day trial subscription to the Buyback Letter, click here now: