Investor Points of Few – A Lesson in Buffett, Banks & Buybacks…

“Banks just turned it all around for U.S. buybacks. Freed after passing stress tests, financial firms unleashed a windfall of repurchases that single-handedly reversed a year-to-date decline in overall authorizations. At $390 billion, planned buybacks are 3 percent above the amount at this time last year…”

By Alan Steel

Looks like the Coca Cola swilling Sage of Omaha has once again defied the critics and doomsayers, as all those experts and celebrity analysts who have questioned Berkshire Hathaway’s large positions in Wall Street banks have watched those investments come good.

For those who don’t know, Buffett’s Berkshire Hathaway is the largest single shareholder in two of the world’s largest banks; Bank of America and Wells Fargo, along with significant positions in US Bancorp, Goldman Sachs and Bank of New York Mellon, and M&T Bank.

According to Bloomberg:

“Banks just turned it all around for U.S. buybacks. Freed after passing stress tests, financial firms unleashed a windfall of repurchases that single-handedly reversed a year-to-date decline in overall authorizations. At $390 billion, planned buybacks are 3 percent above the amount at this time last year, a turnaround from last week, when the total was down 9 percent. JPMorgan Chase & Co., Citigroup Inc. and Bank of America Corp. led financial firms unveiling $92.8 billion of buybacks Wednesday night following approvals from the Federal Reserve, setting a single-day record, according to data compiled by Birinyi Associates Inc. that goes back to 1984.”

Now, I’m not suggesting you should follow suit in purchasing Wall Street bank stocks.

What I am saying is that corporate buybacks – when companies buy back their own shares – have been a strong ally to this now eight year (plus) bull market.

It also shows a confidence in stocks amongst corporate businesses that is no where to be seen across the individual investor community, as sentiment has remained near recession-level lows.

And that level of stock market enthusiasm is matched by globally renowned research houses, like Ned Davis and Pring Turner, where the former is still suggesting equity allocations of 65%!

And as for Mr Buffett?

Well, it’s an enduring message for investors: Find someone with a long track record of success, get their advice and ignore the opinions of celebrity experts and the daily noise.

Alan Steel, Chairman, Alan Steel Asset Management

 

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