(New York)

Buyback stocks have developed a poor reputation recently. Stock buybacks are seen as financially irresponsible and a way for executives to manipulate earnings and share prices. While that may be true to a degree, they also happen to be a great way for companies to return money to shareholders. Additionally, and what is not well understood, is that buyback stocks have a great track record historically. Since 1995, the one hundred S&P 500 stocks with the highest level of buybacks have significantly outperformed the index, earning a 13% return versus the index’s 10%. The same is true for the Russell 3000, so it is not just a case of buybacks working for large caps.

FINSUM: Yes, buybacks may be at their highest total levels historically, but they are flat as a percentage of earnings, so buying hasn’t been any less conservative than in the past. The other good thing is that buyback stocks are usually cheaper than average.