The Top 13 Biggest Buybacks Over the Past Five Years

Mar 26, 2014

The Top 13 Biggest Buybacks Over the Past Five Years

STEVEN RUSSOLILLO

Tech companies have dominated the buyback blitz over the past five years.

Some 13 S&P 500 companies have each spent at least $25 billion in stock buybacks over the past five years, according to Howard Silverblatt, senior earnings analyst at S&P Dow Jones Indices. Seven of those 13 companies hail from the tech sector, led byIBMIBM -1.24%MicrosoftMSFT -1.36% and Cisco SystemsCSCO -0.09%.

As the chart below shows, Exxon MobilXOM -0.22% tops the chart, having spent $91.9 billion on buybacks over the past five years. IBM is second, at $63.7 billion, followed by Microsoft’s $37.5 billion spent on buybacks.

Buybacks can boost earnings-per-share — a closely watched measure of profitability — by reducing shares outstanding, although some companies use the stock they buy to deliver shares to executives who exercise stock options.

But skeptics deride buybacks. They say the cash could be deployed in a more efficient manner, such as investing in research and development, boosting hiring or buying an existing company.

The fact that tech companies top the list shows that the sector’s biggest players have matured from the go-go days of the 1990s tech bubble. AppleAAPL -0.96%made the list even though it just started buying back stock in 2012.

IBM, in particular, has been a methodical buyer of its own stock over the past 20 years. The question now is if the company is using that cash properly. As WSJ’s Dennis Berman recently reported, IBM had 2.3 billion shares outstanding in 1993. Today it has about 1.1 billion, shrinking at more than 1% per quarter over the past few years. At that pace, there will be no more publicly traded IBM shares left by 2034.

Meanwhile, annual capital spending and research and development have been roughly flat for nearly a decade, between $10 billion and $11 billion. ”Only IBM knows what it might be forgoing,” Barclays analyst Ben Reitzes told WSJ in January. But “one can make an argument for organic investments,” especially with revenues shrinking 3% and fresh competition from cloud-computing competitors.

That’s the question facing all these companies, especially with the stock market sitting near record levels.

 

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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