The Wall Street Journal makes the point that the markets are starting to turn against share buy-backs. And, in the case of companies like Fannie Mae (FNM) or Freddie Mac (FRE), that may make sense. But, most shares buy-backs are still a good deal for stock holders as companies that have large cash position and stocks that may be down. Or, companies that simply have more cash than they can ever use.
Hewlett-Packard (HPQ) has certainly made a good decision to bring in shares. It throws off huge amounts of cash and the move increases EPS. Target (TGT) is not dong well, but with a strong balance sheet, it can bring in shares which its board thinks are cheap now. When retail rebounds, they are likely to look smart.
Share buy-backs are actually likely to increase if the market drops more. Companies with the money will view their shares as the best deal in town. And, that is not a bad way to get rid of some cash that earns 5% in the bank.
Douglas A. McIntyre
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