The power of corporate buybacks
Musings: How buyback programs strengthen their stocks
Yeah, stocks splits are sexy and make a big headline splash, even though they do not create any new value for shareholders. Elon is pulling another fast Shibu on his followers - diluting shareholder equity under the guise of giving back to TSLA stock owners.
I prefer a good ole’ corporate buyback program any day - there is nothing more bullish, imo, especially under volatile market conditions. After a little excitement when they are announced (usually during an earnings report), we soon forget about them because they are quietly executed in the background. If you don’t look hard enough, you might miss the signs.
I have been watching the $8B AMD buyback program in action and I am amazed of how it is playing out on the charts. Take a look at the image below:
You can see that the stock has seen very strong support in the low $100s and more recently in the low $100-teens. Even on major down-market days like Jan 27th, Feb 23rd and Mar 8th, the stock has continued to hold its stock price very well.
Now look at the volume data below the chart. The average daily trading volume (yellow line) has been steadily increasing. This is another sign of continued stock accumulation.
And now watch how the RSI (white line) is on a rising trend starting in late Jan 2022.
AMD is one of my high conviction stocks and I own a 6.5% position. My report on their most recent earnings report is here. I plan to add a couple more tranches when it tags close to the $100 mark.
Corporate buybacks have a special place in my heart because they help my stock position grow in value.
Investing in R&D or expanding your employee base is not the only type of investment available to a growth company. An astute management team could always undertake a buyback program to take advantage of under-valuation of their stock, as is being executed by AMD and another of my favorites, UPST ($400M buyback program).