Richman’s wrong here. Using cash to buy back stock is an
excellent way to increase shareholder value, assuming that the
stock in question is undervalued. If a stock is undervalued, each
dollar of buyback creates more than one dollar of value. It’s
like buying dollar bills for, say, 75 cents. There is a good
argument that AAPL is undervalued right now. If so, buybacks would
create shareholder value.
The problem with the MSFT and RIMM buybacks was that the
companies were buying back stock that was overvalued. The problem
wasn’t the strategy (buybacks), but the execution (buying back
Makes sense. I.e. Apple should buy back Apple stock for the same reason any investor should buy Apple stock: it’s a good investment.
Update: To be clear, I’m not saying I think Apple should do a buyback. I’m just saying I agree with Carlton that Apple, with an undervalued stock today, would be in a different (better) position if they were to do a buyback today.
★ Wednesday, 20 July 2011