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Invest Like the Best with Patrick O'Shaughnessy cover image

Bill Gurley & Michael Mauboussin - Putting Theory into Practice - [Invest Like the Best, EP.370]

Invest Like the Best with Patrick O'Shaughnessy

NOTE

Stock Buybacks in a high interest environment

Buybacks are not always done because stocks are undervalued; they are often used to offset dilution from stock base comp and can be accretive to earnings per share. The effectiveness of buybacks in enhancing earnings per share is dependent on the interest rates and company's circumstances. In a low interest rate environment with high multiples, buybacks were generally beneficial to earnings, but in the current high interest environment, they are mostly neutral. The expected EPS gains from buybacks have dissipated, showcasing that companies' actions can diverge significantly from traditional beliefs and practices.

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