When companies with outstanding businesses and comfortable financial positions find their shares selling far below intrinsic value in the marketplace, no alternative action can benefit shareholders as surely as repurchases” – W.E. Buffett (1984)…
Jamie Lowry, European Equity Fund Manager
While the current volatility in equity markets allows us to deploy capital in the opportunities created; long-term investors are also able to engage management and proactively discuss share buybacks as a method of enhancing returns. If we pick our opportunities well, we should not only expect to benefit from the underlying growth of these companies, along with a rerating of their temporarily depressed share price, but also from sharing the spoils with fewer investors as management reduce the number of shares outstanding.
1 Source: Legg Mason, 2006, ‘Clear Thinking about Share Repurchase’ available at http://www.capatcolumbia.com
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Source: ETFWorld – Schroders