The prudent investor should determine why corporations are pressuring buy-backs. Corporate management may have these concerns:
- Slow growth in the economy does not justify spending corporate cash in expanding operational capability.
- A declining demand for corporate products has occurred.
- No better available alternatives may exist for investment (in the opinion of corporate management).
The return of cash to investors may occur because the corporate management worries about the general economic growth in the coming years, a particularly troubling possibility in light of the stock market increase in 2013.
Of course, management may have felt that investment in their shares was appropriate and that their stock was undervalued at current market levels. Many things must be considered in making an investment decision. We at Paragon Financial Advisors help our clients analyze the investments that may be appropriate for their investment goals.
If you have unanswered questions about corporate stock buy-backs or need additional guidance please call us. Paragon Financial Advisors is a fee-only registered investment advisory company located in College Station, Texas. We offer financial planning and investment management services for our clients.