Companies buying their own stock make up more of the U.S. equity market than ever before, underpinning share values even as the Federal Reserve prepares to reduce stimulus.
Stock acquired under company repurchase programs represented 6.4 percent of daily trading in the Russell 3000 Index by value through Sept. 30, exceeding 2007’s level of 4.1 percent, according to data compiled by Bloomberg and Birinyi Associates Inc.
The proportion of trading is higher even as chief executive officers spend $343 billion less on buybacks so far this year, reflecting a seven-year decline in equity volume.
Apple Inc. to Walt Disney Co. and International Business Machines Corp. took advantage of record-low interest rates to raise an unprecedented amount of debt financing and repurchased stock, helping boost per-share U.S. earnings for four years.
With cash at a record, buying by companies is poised to continue in a bull market that is about to enter its sixth year.
“The mathematics are pretty compelling,” Martin Leclerc, founder of Barrack Yard Advisors LLC and a 30-year veteran of investment management, said in a telephone interview Wednesday.
His firm oversees $260 million. “There will be continued shareholder buybacks, even increased shareholder buybacks, because things are pretty good.”
Business, Pages 24 on 12/17/2013