Pullbacks are necessary for efficient share buybacks.

When you see some of your holdings going through price pullbacks of 10-25 % in a short period of time on no particular fundamental reason, you tend to focus on the negative short term sentiment going through the market. One group of companies will benefits from price declines though, those with big share buyback programs.

The mechanism is quite simple when price are lower, the company can buy back a lot more shares and increase future earnings per share therefore increasing profitability.

Some of the biggest beneficiaries are:

Visa

Between 2008 & 2018 over 50 % of the float went away. Look at the price chart…

visa stock chart

 

Apple computers

between 2012-2018 around 31% of the float went away.

aapl

Granted, this is not the only factor providing price increases on stock, but anything helping a profits will push in the right direction. So embrace pullbacks they will make you richer in the long run.

 

 

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