In every business the basic building blocks are always the same:
1. Satisfying customer needs better than the competition 2. Generating cash 3. Producing a sufficient return on invested capital 4. Growing well
What the CEO wants you to know (2023)
51–53 of 53 posts
Re: What the CEO wants you to know (2023)
#52Earlier quoted context omitted.
> why the stock buybacks are necessary when investment in the business is going down The business theory answer is that buybacks are used when there is no better investment opportunity. Let's say the stock trades at 10 times earnings. Can you fund an internal project that's going to return 10% a year? [0] Can you buy another company that will return 10% a year? If not, then a buyback gives the best return to the comp…
So, basically, when a company buys their own stock back (or issues a dividend), they are saying "We can't think of a single thing better to do with this money than simply hand it back to investors who might be able to put it to better use!" Doesn't give me a lot of confidence in the company, to be honest.
Sometimes that action is called "humility"
Re: What the CEO wants you to know (2023)
#53Earlier quoted context omitted.
Buybacks at market price don't distort the valuation. You could make the same wrong about claim about dividends distorting market price my making the stock temporarily more valuable shortly before the dividend pays out. A buyback is a more efficient dividend. It doesn't force a realized gain, and stockholders can choose the size of their cash out whenever they want, instead of the company forcing it.
> A buyback is a more efficient dividend. It doesn't force a realized gain, and stockholders can choose the size of their cash out whenever they want, instead of the company forcing it. That goes into financial accounting engineering, something I'm really not fond of, efficiency in dribbling taxes due is not something I consider an advantage, it's a bug of the system. > You could make the same wrong about claim about…
You can argue that tax law isn't fair, but that's not an argument that the company is mistreating investors or employees or customers.
Boeing returning money to shareholders is not what caused MAX to fail. Boeing making money cutting costs on QA and engineering caused MAX to fail.