Thursday, 23 January 2025

The Buyback Bonanza

What GE’s buyback teaches us about the markets
 
   
     
   
 
JANUARY 23, 2024
   

Hey y’all,
 

I was on the elliptical at the gym this morning at 7:30 when I saw a story on CNBC about GE’s stock buyback.
 

And here’s where I tell you the embarrassing part that most other editors probably wouldn’t tell you… I didn’t really know what that meant.

Now, don’t get me wrong… I had the basic idea… GE was buying back its stock to reduce the number of available shares and increase its value. It’s not too complicated…

But I didn’t really know the nitty gritty, how to trade them or what to avoid.

So I wanted to get those answers today, because I figured, if I didn’t know a lot about buybacks, there were probably a few folks out there reading this who wouldn’t know, either. 

So here’s what a couple of our experts had to say: 

In theory, buybacks are a way to return capital to shareholders.
 

Buybacks have exceeded dividends significantly since 2020.
 

Per the SEC, they are not supposed to manipulate stock prices.
 

Typically buybacks boost share prices.
 

Well, he was certainly right about the last point.
 

Just look at the chart of GE: 
 

 

The buyback news and earnings report caused a BIG response overnight in GE Stock for those who were paying attention.

However, a lot of traders are going to miss out on an opportunity like this because it moves so fast/overnight.

When I asked Chris whether he ever traded off these events, he said “it's mostly priced in with the markets and options.” 

Which could explain the phenomenon that Jeffry is about to tell us about.

 
 

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For me the market tends to trend higher and have more stability during periods of high volume of buybacks and tends to be a little more volatile and less predictable when the buybacks aren't happening as much, aka the buy back blackout period around 30 days prior to earnings. This blackout period also affects anyone in the company with knowledge of the financials.
 
 

See, without Jeffry, I would never have known there was a buyback blackout period 30 days before earnings.

It’s something I’m completely ignorant of that, according to his chart, is affecting the market pretty significantly. 

These buybacks, according to Jeffry, stimulate predictable uptrends in the markets.

That’s a pretty huge thing to keep in mind.

Maybe it isn’t as much about anticipating individual buybacks, but trading the trends that buyback frenzies create.

I would never have even known that had it not been for our experts. Thank goodness for them! 

Hope this helps you get a little better understanding of buybacks. It certainly did me.

To your prosperity,

Stephen Ground
Editor-in-Chief, ProsperityPub

 
   
 

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