Hello everyone! Today i want to share some trading skills with you!
1.
Reasons why companies buy back stock (some of them aren't good); $SPDR S&P 500 ETF Trust(SPY)$
SMART MONEY
Look closely when acompany buys back stock program.
Even a repurchase plan announcement isenough to send a company's stock price higher. Investors often assume that the firm sees good things happening inside the company that are not fully reflected in the market price ofthe stock, suggestingthat the shares are a bargain.
The real question about buy-backs should be: Is this the best use for your company's money? Could the company have received a higher rate of return if it had invested in some other asset besides its own stock?
There is a simple equation you can use to figure this out.
First, divide the stock's price-earnings ratio into 100.
Our company has a price-earnings ratio of 20, so we end up with five per cent.
If the company could invest its assets and receives a higher rate of return (in this case, higher than five percent), then it should not repurchase shares of its own stock, It should instead invest the $20 million to maximize shareholder return.
Reduce taxes
The tax issue might persuade someto prefer stock buy-back programs over dividends.
Be careful though
Companies buy back their shares for many reasons and some of them may be contrary to the interest of shareholders, Here are a few examples: IBolster the stock price, Repurchase programs tend to place a floor under the price of most stocks.
That's because there is now a large buyer in the market. However, corporate assets are being used to prop upshare prices.
If management were to allocate those assets in more productive ways, perhaps the shareprice would not need bolstering.
Increase book value
Book value is calculated by subtracting total liabilities from total assets, The book value per share will rise in a stock buy-back, but only if the price paid for the stock is less than the book valueper share.
Employee incentive options
Ofen companies run out of stock to award as employee incentive options. If the company is buying stock at market price to sell to the manager's pool of employee incentive options.
Increase earnings per share
Earnings per share will rise due to a stock buy-back program.
For example, XYZ company, which trades at $40 pershare, has $100 million in annual profits and 50 million shares outstanding, has earnings per share of $2 and a price-to-earnings ratio of 20.
But it's not. Shareholders can always authorize additional shares at the next annual meeting. Hostile takeover protection. Cash-rich companies are targets for takeovers. Stock buyback programs reduce cash, thus making a corporation less attractive. Enough said.
The company, which is cash-rich with $125 million inthe bank, buys back one per cent of its stock at $40 pershare. That's 500,000 shares or $20 million. As a result, the same profit of$100 million is now.
2.
Warren Buffett Wealth By Age $Berkshire Hathaway(BRK.A)$ $Berkshire Hathaway(BRK.B)$
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3.
Warren Buffett - In A Nutshell
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4.
Amortization vs Depreciation
What's the difference?
Amortization vs Depreciation
5.
Stock Selection Framework
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