Welcome back to a brand new video in our series entitled, "The Investment Checklist". In today's video you will learn what share buybacks are and if that is good or bad for shareholders.
Share buybacks occur when a company uses some of its excess cash to repurchase outstanding shares. If the company can’t identify a better way to invest that excess cash, they may decide the best use for that money is to buy back shares.
Share buybacks can also be another sign of a great management team. It is management’s duty to maximize shareholder value, and if done correctly, this can be a huge way to accomplish that goal. It’s done correctly only if the shares are trading at a discount to fair value and the company steps in to buy back the shares at a discount, which improves value for the shareholders.
In this video, we will show you a few ways management can improve shareholder value via buying back shares the right way and you will also see how a poorly run management team could buyback shares that hurt the shareholders.
Lastly, you will see where we go to look for this information using the free version on Morningstar.
I hope you like this video. If you have any questions, please comment below.
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