What's Happening?
Goldman Sachs has highlighted a group of companies known as 'buyback aristocrats' that have consistently repurchased shares, outperforming the broader market. These companies have reduced their share counts
by 1% or more annually in at least nine of the past ten years. Goldman Sachs' chief U.S. equity strategist, David Kostin, noted that an equal-weight portfolio of these companies has outperformed the S&P 500 by an annualized average of 3 percentage points since 2012. Notable buybacks this year include Apple and AMD, with significant repurchase plans.
Why It's Important?
The focus on buyback aristocrats underscores the importance of share repurchases as a strategy for returning profits to shareholders and signaling management confidence. These companies' consistent buyback activities have contributed to their market outperformance, offering investors potential opportunities for growth. As capital spending increases, driven by artificial intelligence investments, the balance between buybacks and other financial strategies will be crucial for companies seeking to maximize shareholder value.
What's Next?
Goldman Sachs anticipates an increase in buyback activities as companies exit the current blackout period following earnings reports. The firm expects a more active fourth quarter as companies aim to meet year-end buyback goals. Investors will be watching for announcements from companies in the buyback aristocrats basket, as these could indicate future market trends and investment opportunities.
