Are the Increase in Company Share Buy Back Programs a Win?

I was meandering around my favorite news sources and I found an article on MarketWatch that discussed Share Buy Back Programs, and how these programs are giving you more “bang for the buck.”¬† Share Buy Back Programs by MarketWatch

Being an investor that is always looking for investments based in value articles like this always peak my interest. I decided to head over to our system and test this theory. Here’s what I found.

Here are the parameters I’ve set for our system to screen by. We want to look for companies that have an increasing earnings per share over the past year, an increasing P/E over the past year, and companies that have decreased their shares outstanding by over 4%.

This specific profile gives us a total of 49 results.

As you can see these results range across all different industries and market caps. This isn’t necessarily a good or a bad thing, it just means that this strategy does offer a bit of diversification and that the share buy back phenomenon isn’t isolated to any one group of stocks. So, how does this strategy actually¬† perform over 20 years?

Pretty well actually! With just those three basic parameters this strategy averaged over 12% annually and had a lower standard deviation than the benchmark S&P 500. The only thing that I don’t like about this strategy is that it did crash more than the benchmark in 2008.

Overall it seems the conclusions drawn in the original MarketWatch article are completely valid and easily testable. I think we may even add this as a green flag item within our system.

About Aaron G

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1 Comment

  1. Aaron G ryan says:

    awesome software!

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