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I was thinking about this thread about buybacks on my walk with our dog today. The argument was presented earlier that buybacks reduce the supply of shares thereby increasing the price. But from my study of Microeconomics, the equilibrium price depends on the assumption of a rational marketplace; in particular the assumption of a 'rational consumer' who seeks to maximise his 'utility' or 'value'. It appears to me that this 'rationality' is not working in the short term and at a discounted forward P/E of around 8 (correct me please if wrong - second hand info from another poster), the 'consumer' or in this case the buyer of BP shares is not behaving rationally.
I take some comfort in Buffet's aphorism (paraphrased) ; ' in the short term, the market is a voting machine but in the long term it is a weighing machine'. The implication being that rationality will prevail and we will see a re-set of the share price based on the ongoing reduction of supply through buybacks....in the long term! Problem is, my long term is about a year!
I think the buyback of $500m or £360m was over 19 days, missing just one day when the price went to 320p. The share price stayed in a narrow channel 290p to 320p, looking at the trades at the time there was also a major buyer buying 1500 shares sometimes 20 times a day right up to 320p. I thought it was BP's purchases until I read the RNS's.
Also I am expecting the 310p limit to be applied to the buyback again.
No it wasn't evenly done. If you look back at previous RNS in Apr/May you can see when and how much they bought as a company has to give details via an RNS when they purchase their own shares. From memory they had a max price of 310, so on days the SP was above that there were no transactions, but lots more on down days.
The second RNS today indicates that the buyback programme runs to 2nd Nov. Does anyone know whether the last buyback programme was executed evenly over the period May - July? In May we were looking at a steady rise in SP which at the time I attributed to buy backs. Obviously not, given the steady fall over the last 6 weeks or so!
dividends are determined by a combination of profitability and company dividend policy
T2r
''Can anyone give an example where buy backs have had an effect on the share price or size of dividend of any company?''
A buyback is a return to shareholders.
The share price is determined by the market (supply/demand).
There is significant evidence that the 'crowd' will beat an 'expert' pretty much every time.
Great book to read is :
https://www.amazon.co.uk/Wisdom-Crowds-Many-Smarter-Than/dp/0349116059/ref=sr_1_2?dchild=1&keywords=wisdom+of+the+crowd&qid=1627976505&sr=8-2
Also a summary: https://en.wikipedia.org/wiki/Wisdom_of_the_crowd
Chance vs skill, or averaging the crowd? Good question ;-)
"Role of chance versus skill
Chance or randomness is one of the features of gambling that has been historical used to distinguish it from investing and/or speculation (e.g., O’Malley, 2003; Reith, 2002). However, as mentioned earlier, while randomness is a central feature of many gambling games (e.g., lotteries, scratch tickets, electronic gambling machines, bingo, and most casino table games), skill does have a significant influence on the outcome of some gambling activities (i.e., horse race betting, sports betting, and all person-to-person games such as poker, golf, etc.).
What many people fail to realize is the central role that chance also has in the financial markets. Most economists agree that the major financial markets are fairly “efficient,” meaning the current bid/ask price of a stock or commodity is a fairly accurate valuation, as it is an aggregate real-world reflection of what investors know about the stock/commodity in terms of company management, cash and capital assets, and future prospects (Chan, Gup, & Pan, 2003; Malkiel, 2003; Verheyden, De Moor, & Van den Bossche, 2015). Two important corollaries of efficient markets are that (a) day-to-day directional changes in stock valuation are largely independent of the previous valuation (i.e., random) (Fama, 1995; Malkiel, 2003), and (b) the only way of obtaining higher than average returns on the general market is if the person has information that the general public is unaware of (“insider information”), and/or he/she has superior analytical powers in judging the relative importance of the publicly available information.
The evidence indicates that despite the heavy reliance on research and information to select investments, only a small percentage of professional analysts and traders are able to consistently outperform the average return of the market (Andersson, 2004; Bhootraa, Dreznerb, Schwarzc, & Stohsd, 2015; Cuthbertson, Nitzsche, & O’Sullivan, 2010; Dickens & Shelor, 2003; Fama & French, 2010; Porter, 2004). [Nonprofessional investors generally underperform the market due to higher rates of trading (thereby incurring higher transaction costs) and choosing higher-risk financial products (Barber & Odean, 2000; Barber, Lee, Liu, & Odean, 2009; Grinblatt & Keloharju, 2000; Kumar, 2009; Schlarbaum, Lewellen, & Lease, 1978a, 1978b).] The recognition that most investment managers do not perform above chance accuracy has led to the popularity of “index funds” that simply attempt to track the performance of the general market (and that have very low management fees)."
There is no doubt, scientifically speaking, that day trading is gambling no matter how one spins it.
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5370364/
"Let's see in a minute"
why ?
what's the rush ?
gotta love these nano second penny wise pound foolish traders :-)
nice and steady as she goes cap'n
divi's divi's and yet more divi's
lovely jubbly x
In my experience buybacks never yield cash to the investor. I'd sooner actually have the cash in the form of a dividend in my bank account please.
Hmmm... The 4% dividend increase is obviously welcome, however it will take until 2025 to get back to the level we were at a year ago.
Buybacks. What value was there in the previous £500m buyback of shares at around the region of 310s when the current SP is 289. Is that the best way to return cash to shareholders or just financial stupidity.
My guess is that these results will do very little today or in the near future to change market sentiment towards BP.
Let's see in a minute
I can't, T2R.
I only see buy-backs benefitting executives on an incentive scheme, since EPS improves.
Neat way to feather their own pockets.
Sage !!
Nope!
Can anyone give an example where buy backs have had an effect on the share price or size of dividend of any company?
Can't complain - brilliant results. Debt down; dividend up; meaningful share buyback; excellent outlook.
$5.4 underlying operating cashflow
$32.7bn net debt
Looks excellent. Go to BP website. Problems with news feeds again this morning. London Stock Exchange awful.