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Beat the Market by 30% Riding Tech Stock Buybacks

tech stocks

In just the first six months of 2015, U.S. firms spent more than a quarter of a trillion dollars on share buybacks.

And federal data shows that corporate buybacks, which have been rising for years now, are likely to grow even more between now and 2020.

The really good news for tech stocks is this: Technology companies make up the bulk of firms that are racing to repurchase their stock.

There's an easy way to cash in on this buyback frenzy. With it, you can beat the market by more than 30% over the next five years...

What Are the Stock Buyback Benefits for Investors?

Retail investors can reap a number of stock buyback benefits.

But it's important to understand how buybacks work when determining if they're good for your portfolio.

Here's a breakdown of how a stock buyback benefits retail investors like you and me...

It's Time to Fix the Stock Buyback "Con Game"


Stock buybacks have hit record levels - but what's driving the growth is dangerous for you and our economy.

Total stock buybacks for 2014 amounted to $696 billion, or 4% of U.S. gross domestic product (GDP), according to Research Affiliates. That's a lot spent on a practice that used to be tightly regulated by the U.S. Securities and Exchange Commission because it was considered manipulative.

You see, even though they're common now, buybacks are manipulative. They make sense for some companies, but now they're often used to inflate stock prices - and make executives rich.

In fact, most of today's stock buybacks are not only unproductive for the long-term health of corporations, but destructive in terms of economic growth.

Here's how bad the stock buyback "con game" has become - and how we can fix it...

Company Stock Buybacks: Good or Bad?

company buybacks

Company stock buybacks sound innocent enough: a stock buyback occurs when a company repurchases its own shares.

But the effect is insidious. Buybacks inflate paper profits without producing anything of tangible value -- which means earnings will be inflated and misleading to investors.

That's why Money Morning Capital Wave Strategist Shah Gilani accuses buybacks of being a large part of the "financial engineering" going on in U.S. markets right now.

In the following video, Gilani explains exactly how company stock buybacks work -- and how investors can make money in the buyback game:

Are Stock Buybacks Good for Investors?

are stock buybacks good for investors

Stock buybacks are hitting pre-recessionary levels, leaving observers wondering: Are stock buybacks good for investors?

Some companies may use it as a way to artificially inflate a stock price, although others may only be trying to deliver to shareholders the actual value of the company.

Here’s what you need to know for the next time you hear a stock buyback announcement…

Buyer Beware: How Stock Buybacks Create False Value

What are today's best investments?

Corporate stock buybacks are usually touted as good for investors - it's typically one of the top demands that activist investors make when targeting a company.

But while stock buybacks can benefit current shareholders, they tend to distort a company's earnings picture - which can mislead potential investors.

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Why Stock Buybacks are More Harmful Than You Think

Companies flush with cash are increasingly engaging in stock buybacks - taking money and buying back some of their own shares.

During the 18-month period from April 2011-October 2012, companies in the S&P 500 bought back a net 8 billion shares. At the end of 2012's third quarter, there were about 300 billion shares outstanding for S&P 500 companies, the lowest quarter-end total since the middle of 2009.

Some investors see stock buybacks as a good thing: The company has extra money and thinks its stock is at a bargain price. Companies often describe stock buybacks as good investments in sound businesses.

But in reality, stock buybacks can actually hurt shareholders in the long run.

"Behind the wondrous façade, stock buybacks are just a means for management to enrich themselves," said Money Morning Global Investing Strategist Martin Hutchinson. "The truth is buybacks are positively damaging to the interests of ordinary shareholders."


It Looks Like the Market Is Saying "OMG"

Today I want to talk about a few things I've been scratching my head over lately.

First, about those polls leading up to the presidential contest.

How come they were so wrong? How come the candidates were inches apart right up to the finish line, and then it's like a "tortoise and the hare" kind of ending?

Did Romney even finish? Is he finished? Is the Republican Party finished?

Maybe the problem is the questions they ask, the pollsters, that is, or the way they ask them. Maybe they ask questions like a lawyer leading a witness would.

You have to wonder who pays for those polls, too. Survey says: the Super PACs - or is that the stupid hacks? Don't you wish they'd post the questions they asked along with the "Survey Says" results?

And, how stupid are the markets, make that investors, you know who you are. The day of the election, the market was anticipating a Romney victory, after all the polls said it was more than possible, so we got a smart little rally.

Then reality set in. Four more years. And you think it's going to get better?

Here's something else to chew on. If you think the Republicans are going to roll over and play dead, now that they are dead, think again.

The only way to fight back when you're dead is to kill the other guy, so you're both dead. Then, of course, you say, I was dead first, I couldn't have killed the economy, I couldn't have driven us over the fiscal cliff, they did it!

It looks like the market is saying, OMG (that's Oh My God, for you non-texters), we're going over the cliff and there's no stopping us.

Trust me on this one, that cliff everyone's been talking about - it ain't the only cliff.

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What Wall Street Will Never Tell You About Stock Buybacks

Every time I hear a Wall Street analyst extolling the virtues of stock buybacks I just want to scream.

"Don't fall for the flim-flam," I think to myself, "demand the cash instead!"

That's why my Permanent Wealth Investor service focuses on the kinds of dividends you can actually hold in your hand. For me, cash is king.

Anything else is simply a magician's trick. It's a sleight of hand designed to make you think you're getting something when you really aren't.

Share repurchases or buybacks are the perfect example.

Behind the wondrous façade, stock buybacks are just a means for management to enrich themselves. The truth is buybacks are positively damaging to the interests of ordinary shareholders.

The Ruinous Truth Behind Apple's Stock Buyback

Take Apple Inc. (Nasdaq: AAPL), for instance. It's the stock everybody loves these days.

This $653 billion company recently announced a $10 billion stock buyback over three years, beginning October 1. Naturally, shareholders cheered, believing the buyback would boost the share price.

But consider this: Apple is buying back shares at several times book value, so the buyback will actually dilute Apple's book value per share.

To continue reading, please click here...