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"Recent market trends show a bullish run on Wall Street, marking a significant turnaround from the challenging year of 2022 when major stock indexes experienced bear markets.
In 2024, the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite have all surged to new all-time highs.
This remarkable rally can be attributed to a combination of factors, including a robust U.S. economy, stronger-than-expected corporate earnings, the emergence of artificial intelligence (AI) as a prominent trend, and a high level of share repurchases.
Although total corporate share buybacks in 2023 declined from the record levels seen during the 2022 bear market, S&P 500 companies collectively spent $787.3 billion on share repurchases over the trailing 12 months, as of September 30, 2023, which remains well above the historical average.
Companies undertake share repurchase programs for various reasons.
These include boosting earnings per share (EPS) by reducing the number of outstanding shares, increasing the ownership stakes of existing shareholders, and demonstrating confidence in the company's long-term growth strategy.
While more than half of S&P 500 companies repurchased at least $5 million of their stock in the September quarter, there are a few standout companies in terms of buybacks.
Three widely-owned companies have collectively repurchased $1.07 trillion of their stock since 2013:
- Apple: $651 billion in share repurchases since 2013
Apple's buyback program, initiated in 2013, has seen the company repurchase approximately $651 billion of its common stock.
This amount is substantial, equivalent to buying 491 of the other 499 S&P 500 companies, excluding Apple.
Apple's strong brand and loyal customer base have enabled its substantial cash reserves for buybacks. Additionally, its strategic shift toward subscription services is expected to further enhance its ecosystem and operating margin.
Despite the positive impact on EPS from reducing its outstanding share count significantly, Apple has shown signs of growth slowing, prompting investors to closely analyze its underlying growth trends.
- Alphabet: $240 billion in share repurchases since 2015
Alphabet, the parent company of Google, has been actively repurchasing its stock since 2015, with $61.5 billion spent on buybacks in 2023 alone.
Google's dominant position in the search engine market and the growth of its cloud services have been key drivers of Alphabet's success.
- Microsoft: $183 billion in share repurchases since 2013
Microsoft has been consistently repurchasing its stock for over a decade, with approximately $183 billion spent since 2013.
The company's ability to blend its legacy operations with high-growth initiatives in cloud services and AI has contributed to its continued success.
Microsoft's strong balance sheet and cash flow have enabled it to pursue innovation, acquisitions, stock repurchases, and dividend payments.
These companies' share repurchase programs have undoubtedly boosted their EPS, but investors should remain vigilant in analyzing their growth trajectories beyond these financial metrics."