Speaking of buybacks and people who are actively trying to push companies in the direction of eschewing myopia in favor of a long-term vision, you might recall that back in January, BlackRock's Larry Fink used his annual letter to effectively chide management teams on this issue. To wit, from that letter:
Companies have begun to devote greater attention to issues of long-term sustainability, but despite increased rhetorical commitment they have continued to engage in buybacks at a furious pace. While we certainly support returning excess capital to shareholders, we believe companies must balance those practices with investment in future growth.
To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society. Companies must benefit all of their stakeholders, including shareholders, employees, customers, and the communities in which they operate.
That was not well received in some circles, for obvious reasons, not the least of which is that it came across as something of a threat given how large BlackRock (BLK) is.
In the course of discussing buybacks over the weekend, I cited a recent JPMorgan note in which the bank's Nikolaos Panigirtzoglou took an in-depth look at repatriation following the tax cuts on the way to explaining how buybacks likely helped prop up the market in Q2:
Based on the average divisor change of four US equity indices, a proxy for the share count, we estimate that the net equity withdrawal by US companies overall including both financial and non-financial companies tripled in Q2 ($150bn) vs. Q1 ($50bn).
As it happens, Panigirtzoglou revisits this in his latest note (dated Friday) and in light of my weekend post, I wanted to highlight a couple of excerpts for readers here. JPMorgan makes a critical distinction between "values" and "volumes". To wit:
Announced US buybacks look set to approach one trillion dollars this year if one annualizes the YTD pace, the highest on record. But in volume terms, at 4% of the capitalization of the S&P 500 index, this year’s announced US buyback pace is lower than the 6% record high pace seen in 2007 and lower than the 5% post Lehman peak seen in 2012.