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Are corporate buybacks a good business strategy?

Firms like HP, Pepsico and The Washington Post Company are purchasing their own stocks in droves. So far this year, U.S. companies have announced they will purchase $273 billion of their own shares, compared with $56 billion this time last year, according to Birinyi Associates.

By Jodi Westrick  |  October 1, 2010; 6:03 PM ET  | Category:  National Save & Share:  Send E-mail   Facebook   Twitter   Digg   Yahoo Buzz   StumbleUpon   Technorati  
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I just believe it's a bad time to announce this luxury of these corporations. We have millions of citizens hurting and you have to read this insult of corporations siting on billions of dollars. It's part of the cold heart of Capitalism.

Posted by: shipfreakbo214 | October 6, 2010 11:57 PM

Stock buybacks are a stupid strategy that only makes sense for weak management with a short term outlook. It makes the EPS look higher because there are fewer shares of stock in circulation and bids up the price of the stock by making it look like there is more demand for it, but does nothing to enhance the long term competitiveness of the corporation. If management had a real idea of how to build their companies then they would be using their capital instead of squandering it with share buybacks. This type of management is why our economy is in the shape that it is now.

Posted by: ThomasFiore | October 7, 2010 1:06 AM

US company strategy = stock buybacks

Rest of World company strategy = R&D, hiring, expansion and growth

hmm wonder which ones I should invest in

In a market where companies are complaining bitterly that the financial firms aren’t providing enough capital does it make sense that they are using the capital they do have for non-growth related activities?

This is exactly the time when we have high education levels, high unemployment and low wages that companies should be heavily heavily heavily investing in R&D and BD.

What they are doing right now is short term thinking to make a few Wall-Streeters happy and artificially inflate the stock value of these companies.

The entire thing reeks of a McKinsey “business strategy” scheme.

Posted by: Southeasterner | October 7, 2010 1:37 AM

Here they go again. Just a year ago they were crying for cash. Now they suddenly throw tons of dollars to buy their own shares, to look gigantic.

We all know how the rotten spiel ends. They certainly do, too. But they just don't seem to care a bit.

Expect to see them soon in rags and ashes , crying for cash, swearing to sin no more and holding out their begging bowls for taxpayers' bailouts.

They are very good at it. And we , the pigeons, are helpless.

Posted by: bekabo | October 7, 2010 2:09 AM

I didn't realize corporations had only two choices as to what to do with their cash. And, as yet, at least, it is their cash to do with as they please.

Cold heart of capitalism? As opposed to the nice warm cozy heart of socialism/communism? Why you're looking for warm fuzzies from the structure of the economy is beyond me.

And on an unrelated note, why does the Washington Post run this kind of insipid, absolutely meaningless user poll?

Posted by: asdf2 | October 7, 2010 6:29 AM

as long as obama is president, corporations will do what they have to do to survive...
by buying back the stock...
they can maintain control over the price of the stock...
in november kick out obama's base of power in the house and senate...
and in 2012, finish the job...
as long as obama controls the executive branch of goverment, there will be no jobs...

Posted by: DwightCollins | October 7, 2010 6:37 AM

After working decades in the corporate world, I wish I could say that the managers of our nation's largest corporations were somehow smarter than the people that work for them. Unfortunately, the cartoon Dilbert comes closer to reality than most of the stories that appear in media about our nation's so called "titans of industry." Although they may have been robber barons, Carnegie, Rockefeller and Gould at least knew how to grow and expand a business. The current crop is all about financial shenanigans which is why many of them have plants in China and fully support that country's manipulation of its currency.

Posted by: odonnell521 | October 7, 2010 6:38 AM

It could very well be that businessmen are much wiser than the academic dreamers who are currently trying to socialize America. It could very well be that these businessmen are the ones who have managed to interrupt the current administration's resolve to socialize America. The academic theorists who have filled the White House staff over the course of the last two years, have given it their best shot, and, are heading back in defeat to their universities, where they must answer to no one for their failures, but where they can continue to indoctrinate young minds with their ideologies of wealth redistribution and Marxist theory "from each according to his abilities, to each according to his needs." Thank you Corporate America for whatever contribution you may have made to saving our country from tyrrants.

Posted by: mbrennan1 | October 7, 2010 8:05 AM

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