Thursday, March 5, 2015

The Impact of Buybacks

According to data compiled by Birinyi Associates, stock buyback authorizations set a new record in February, at a total of $118.32 billion. That’s the most since TrimTabs Investment Research began tracking that data in 1995, and almost twice the $55 billion bought in February of 2014.

Stock buybacks have been growing ever since the bull market started back in 2009: Companies bought back $2.1 trillion of their own stock between 2009 and the third quarter of 2014. In the first three quarters of 2014 alone, corporate buybacks rose by 27 percent, to $567.2 billion, and Apple alone bought $17 billion of its own stock.

These buybacks have had a significant impact on the movements of the market. According to a study from Bloomberg, there has recently been roughly $5 billion in buybacks each trading day - accounting for fully 2 percent of the total trading volume.

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