On May 2nd, Apple’s board of directors authorized an additional program to repurchase up to $110 billion of the company’s common stock. The company has spent more than $800 billion on buybacks since 2012.
Mark Hulbert for MarketWatch:
[A]ccording to Birinyi Associates, May was a “record-setting month for announced buybacks,” and “2024 is the second-highest ever in the number of [buyback] announcements as well as the value of announcements.”
A big part of why May set a record for buyback announcements was Apple’s announcement of a $110 billion stock repurchase program — the “largest single program announcement on record,” according to Birinyi Associates. All told since Apple began repurchasing its shares in 2012, it has spent more than $800 billion on buybacks.
Apple’s outsized role prompted me to examine its record as a market timer when executing repurchases… Apple’s average total return subsequent to above-average buybacks was lower than in the wake of below-average repurchases. Not impressive market timing, in other words. Still, given the significant variability in Apple’s quarterly returns, the differences in the chart are not significant at the 95% confidence level that statisticians often use when determining if a pattern is genuine.
The root cause of lousy market timing is what Edward Chancellor, the financial historian and investment strategist, calls the “capital cycle.” During the up phase of this cycle, he argues in his book “Capital Returns: Investing Through the Capital Cycle: A Money Manager’s Reports 2002-15,” high profitability and plentiful liquidity leads to corporate overconfidence and a loosening of “capital discipline.”
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MacDailyNews Take: Bottom line: Apple needs to better follow Warren Buffett’s advice when executing AAPL buybacks (within legal limits):
Be fearful when others are greedy and greedy when others are fearful. – Warren Buffett
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I’m curious about the degree to which they’re able to time their purchases. Not clear on the law, but the repurchases have to be somewhat at arm’s length I believe, so they’re not using insider information to time them.
It’s a pity Apple couldn’t have used just 10% of that number to make a large acquisition like other tech companies do. I’m not complaining, I’m only saying it would have been nice to impress certain types of big investors. Apple is still doing quite well, so it certainly wasn’t necessary. I have to believe Apple knows what it’s doing with its money.
Making a large purchase could be a problem at Apple’s size. What would they buy that wouldn’t engender scrutiny? It’s hard to think of anything. They could have bought Nvidia before its valuation went up. But that certainly could have been a problem. They could have reinvested in ARM, but would that have been allowed?
But smaller purchases that they missed include the periscope lens manufacturer that Samsung ended up buying. Now Apple either has to go to Samsung or some other company. How nice it would have been if they didn’t. Possibly they could have offered the guys who developed the SoCs that Qualcomm bought, who came from Apple, enough to bring them back. That would have ended the new X Elite SoCs from Samsung.
As a shareholder with a fair amount of shares, I would have preferred they raised the dividend. Honestly, the 0.5% (approx.) they give is inexcusable. Just $1 per share now. They have about 15.4 billion shares. If they doubled the dividend, it would only cost $15.4 billion. That’s just a small fraction of the $110 billion buyback. Then, the $104 billion in debt they have, mostly for these buybacks, is unnecessary. I’d like to see them pay some of that off. The interest alone is massive.
Its only 25 cents (!) per share currently.
25¢ per quarter, $1 yearly, per share.
As a shareholder I would have preferred they used that money to increase worker salaries and benefits, and to create training and manufacturing facilities in urban America.