Is Warren Buffett Right on Stock Buybacks? Bank Failures and the FDIC
By Derek Moore
Show Summary:
Derek Moore is back with Mick Puck to discuss the Warren Buffett quote excoriating opponents to share buybacks. Why buybacks and dividends are more closely related than you think. Using Walmart to explain how the change in shares outstanding affect EPS. Where to see share repurchases and dividends on a company’s cash flow statement. Plus, our quick overview of the Silicon Valley Bank (SVB) debacle and what the FDIC’s list of troubled banks at the end of 2022 told as (if anything) about the 3 banks that failed the last 2 weeks.
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Topics Include:
- SVB Silicon Valley bank example of duration risk in bonds (mortgage-backed securities)
- How MBS mortgage-backed bonds see duration sensitivity to interest rates rise as rates rise.
- Where to find the FDIC quarterly report on banks including their watch list and amounts
- Warren Buffett statement on how share buybacks are misunderstood.
- Do companies always buy back shares when their stock is undervalued?
- Where to find on cash flow statement share repurchases and issuance
- Where to find on cash flow statement dividends paid out
- Explaining the difference between a buyback yield and dividend yield
- How much did Apple repurchase through buybacks last year vs dividends?
- Walmart as an example shows how the reduction in outstanding shares affects earnings per share.
- Comparing capital gains on shares to dividends for normal investors and their preferences
- How buybacks are more flexible for dividends
- Do buybacks show confidence in one’s own shares for companies?
- Positives and negatives for buybacks include stock-based compensation and dilution.
- Finally, some recommendations for a movie and a TV show
Mentioned in this Episode:
FDIC watch list of troubled banks and quarterly bank profile graphs
Sequence of recessions and what comes first
US Debt Bomb and Growing Interest Rates effects on US Federal Deficit and Budget
Underperformance of International Stocks
Wharton Magazine article Beware of High Dividends
Reuters article showing Discount Window picked up towards the end of 2022
Jay Pestrichelli’s book Buy and Hedge
Derek’s new book on public speaking Effortless Public Speaking
Derek Moore’s book Broken Pie Chart