Share buybacks – as US blazes a trail, SA companies missing the boat
In September last year we launched the Biznews Global Share portfolio. Putting your investment ideas into the public domain is always a risk. But given our view at Biznews that poor custodianship of the SA economy will keep white-anting the value of the Rand, we saw offshore investment as the new normal. And as the best way to learn about something is to actually do it….
Although the portfolio is positioned as a long-term investment with a holding period of "forever", the sliding Rand and some sensational gains by three of our six stock picks has delivered a fabulous return to those who coat-tailed us. I'll be hosting a webinar with the latest update at 12:30 today – attendance is free but you do need to register beforehand at https://attendee.
Among the interesting differences between the major global companies we've invested in and their South African counterparts is share buybacks. Local companies seem happier to build up their cash piles. But in the US, buying back your own shares is often rewarded with higher share prices. Of the six stocks in our portfolio, three are buying heavily.
Apple Inc invested a staggering $35bn in share buybacks in the year to end September, coming on top of $45bn the year before. IBM has been doing the same thing for some years and scooped up another $3.8bn of its own shares in the September quarter. And Alphabet (formerly Google) has just announced its own first ever share buyback programme – authorising investments of $5.1bn. Perhaps local boards are missing something? Or do they think their stocks are overvalued?