I HAVE BEEN SAYING THIS FOR YEARS!
[email_link]
In what may be the best report ever on stock buybacks, accounting and tax analyst David Zion had this sobering comment: After reviewing the $2.7 trillion in buybacks by the S&P 500 from 2004 through 2011, “it looks like most of the buybacks by the S&P 500 over the past eight years have not yet added much value for remaining shareholders.”
Which is unfortunate, because as Zion writes, “it seems like many investors and analysts assume that buybacks automatically add value, regardless of the price paid.”
SOURCE: http://www.cnbc.com
Definitely correct. Most companie buy back stock when P/E’s are usually high. This is a poor allocation of capital. By definition, a stock buyback above book value (P/B greater than one) results in lost book value.