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The financial news networks have their hands full.
That's why today, I want to talk to you about something they're missing...
You see, the buyback corner of the market has been serving up record-breaking numbers lately.
Now, I know that "buybacks" may not sound like the most exciting thing in the news right now – but the truth is, they're extremely important for the overall market.
And this could be the one catalyst we're looking for to rally the market higher.
Here's what I mean...
The Buyback Record Breaker Could Pad Your Pockets
Well, corporate America has officially been under the new tax law, and they celebrated it by rolling out a new record: $1 trillion of stock buybacks.
This buyback boom can easily contribute to the strong economic growth we've seen, and when you add on the corporate tax overhaul that was signed into law, this strong buyback trend shouldn't be a surprise.
You see, the new tax law leaves companies with a lot more cash to help pump up their stock price. Not only did the new tax law reduce the corporate rate, it also handed corporations a large break when it comes to foreign profits.
And companies have wasted no time in utilizing this extra cash, using it to reward shareholders. Buyback announcements spiked around 64% in 2018.
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Now, buybacks are always a sign of good things to come. You see, they tell investors that the company has confidence in its growth prospects – and it also shows confidence in the operations, sales, and revenue-producing potential over a longer haul. This make the company much more appealing to investors, as you'll know the stock has the capability to continue to climb in price.
Here are the top three reasons why share buybacks are good for the stock market – and your pockets:
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- They show investors that the company is confident and expecting growth in the near future.
- It's a way to pay off investors and reduce the overall cost of capital for the company.
- The company believes the shares are undervalued, so they can pick them up at a price they deem to be "suppressed." When the price increases, the company can issue the stock back at the higher value.
Now, I do see it as a "tell" that companies believe they'll be able to meet, or even exceed, their EPS projections without the need for a buyback program. This shows that a bullish rally could be on the way.
With that said, keeping a close eye on buyback numbers and announcements can help your bottom dollar in all situations.
But at the end of the day, the return investors receive during buybacks is still marginal. Sure, these payouts can add up to a nice sum here and there – but there's a much better way to bring in consistent income week in and week out.
Now, I've been a professional trader for over 25 years... which means I know a thing or two about how to get the most bang for my buck.
And while thousands of everyday folks are risking tons of money investing in stocks, I've been showing my readers how to collect thousands of dollars week in and week out, without buying a single share.
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The post This Record Setting Trend Could Deliver Your Next Big Winner appeared first on Power Profit Trades.
About the Author
Tom Gentile, options trading specialist for Money Map Press, is widely known as America's No. 1 Pattern Trader thanks to his nearly 30 years of experience spotting lucrative patterns in options trading. Tom has taught over 300,000 traders his option trading secrets in a variety of settings, including seminars and workshops. He's also a bestselling author of eight books and training courses.