Credit Suisse analysts argue that buybacks mean more for investors than just a one-off boost

Credit Suisse analysts argue that buybacks mean more for investors than just a one-off boost. Credit Suisse has tracked a basket of ASX stocks that have bought back more than 2% of their shares and found that since 2006 the basked returned 21%, compared to 6% for the ASX 200 Accumulation Index. Analysts Hasan Tevfik and Damien Boey of Credit Suisse say there are many reasons companies following the buyback strategy have done well, including the fact they tend to have low gearings. Of course EPS accretion from a buyback keeps momentum focussed investors happy. Buyback stocks tend to be those with businesses that generate much more free-cash, again a favourite metric for many investors. Also, we think buybacks outperformed because they signal that managements are attempting to beat their cost of capital. AFR article on the stocks most likely to launch a buyback (subscription required). (VIEW LINK)


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