Minyi Chen, Portfolio Manager of the TrimTabs Float Shrink ETF (TTFS) provides color and analysis to the recent S&P Data released on Q2 ‘14 buybacks.
Buybacks dominance: Highlights of the data
- Q2,’14 buybacks decreased 1.6% to $116.2B from Q2,’13 $118.1B
- 23% of companies reduced their shares used for EPS by at least 4%, and increased their earnings-per-share by at least 4%
- Information Technology maintained its dominance of buybacks (with Apple inc. (NASDAQ:AAPL) as the poster child)
- Companies continue to increase their total shareholders’ returns through buybacks and cash dividends: Q2 was down from Q1, but the 12-month $865.9 billion ($533.B in buybacks, $332.9B in dividends) set a record
- Given the continuing Bull market (average daily price up 3.9% for Q3), which is putting more options in the money, and M&A deals (in the works) using shares, companies may need to spend more in Q3 to keep up with share count reduction; and ‘more so’ if Q4 holds the market level
Tiger Legatus Master Fund was up 0.1% net for the second quarter, compared to the MSCI World Index's 7.9% return and the S&P 500's 8.5% gain. For the first half of the year, Tiger Legatus is up 9%, while the MSCI World Index has gained 13.3%, and the S&P has returned 15.3%. Q2 2021 hedge Read More
Despite the slight decrease in buybacks from Q2 ’13, the amount of capital companies commit to stock buybacks remains at a historically high level because:
- Slow economic growth prospect discourages companies to spend aggressively on expansion
- Returning cash to shareholders is considered “good” corporate governance
- Buybacks account for the bigger part of corporate payout policies (on average public companies pay out twice as much on buybacks than on dividends)
- Public companies face greater need to offset share dilution (as stock prices go higher, more options get exercised)
TTFS is an outperforming strategy to take advantage of the current buyback trends on the U.S. equity market.
Minyi Chen, CFA – Executive Vice President/Portfolio Manager
Mr. Chen joined TrimTabs in 2008. He is the Vice President of TrimTabs Investment Research and Portfolio Manager of TrimTabs Float Shrink ETF. He is responsible for the management of quantitative research, marketing, technology, sales and operations. Mr. Chen began his career as an international finance manager at ZTE Corporation, a prominent provider of telecommunications solutions in 2005.
Born in Shanghai, Mr. Chen holds a B.A. from Shanghai International Studies University in China and a M.B.A from Northwestern Polytechnic University in California. He is a Chartered Financial Analyst (CFA) charterholder. Mr. Chen speaks English and Chinese.