2010.06.18 17:19:40

tycho

Companies listed on the S&P 500 have a record pile of cash on hand, and everybody wonders what they will do with it.

Looking at the unemployment rate figures in the US, it does not look like the companies spend the cash on creating jobs. Instead, those companies are looking at two possibilities: First, acquiring companies or assets in Europe to benefit from the low Euro-Dollar exchange rate. The second possibility they are looking at is to buy back their own shares.

Companies engaging in share buy-back strategies usually outperform the market, because they believe the shares are at a discount to their intrinsic value. And now that the level of companies applying for the right to buy back their own shares reaches a record level not seen since 2007, it is probably time to go long on those shares.

cash | buy-back | S&P 500 | investing