August 2022
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August 8, 2022

Financials Matter

"It's Not Just About Finance"

Legal Ways to Profit From Insiders

Unless you are a member of Congress you would go to jail for trading on inside information.

However, for those of us who can’t escape prosecution (like certain Congressman/women) there is a legal way around it…and it’s a no-brainer.

Sort of.

This is so simple, you’ll need someone to help you misunderstand it.

Ready?

Here it is.  Buy stocks that buyback their own shares.

Pretty simple, Yes?

If you’re wondering why it makes sense, just look at the three most common reasons why companies’ buyback their own shares:

  1. The stock is undervalued

  2. Improve financial ratios and boost confidence

  3. Reward shareholders without the taxation of dividends

To further illustrate this point, look at some data I borrowed from an S&P research source:

The historical growth of $10,000 invested in the 100 large-cap companies with the highest share buyback ratios versus the S&P 500 Index from 1976 through May-2018 yields the following:

The top 100 Share Buyback companies grew to $5,882,958.  The S&P index grew to $1,019,927.

In Plain English that means you made $4,863,031 MORE (from your $10,000) buying companies that bought back their own shares than you would have made buying the S&P index.  (Data per Standard & Poors and Ford Equity Research).

Sounds like a no-brainer, right?

For the most part it works like a charm.

However, there are exceptions that can hit you (like a 2 X 4) up side your head leaving you dizzy and broke.

It’s called corporate theft via desperation.

In our August newsletter we feature an article “Why All Share Buybacks Are NOT Created Equal.”

See for yourself.

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