Joel Tillinghast on stock buybacks

Buybacks are most popular when companies are feeling flush, and those are often the moments when buybacks are least beneficial.  As the market was topping out in the third quarter of 2007, S&P 500 companies bought back $171 billion of stock.  A year and a half later, the S&P crashed to half its former value, and in the first quarter of 2009, only $31 billion of stock was repurchased.  This is disappointing not just because the timing of the buybacks was inopportune, but also because buybacks signal confidence in the company's value and outlook.  Cheer is most appreciated when despair is all around.  When I study some buybacks that turned out badly, I find that very few companies took the action because of a discount to intrinsic value.

~ Joel Tillinghast, Big Money Thinks Small, p. 117