In the past, I have been critical of the effectiveness of the stock buyback programs at mega-cap firms like General Electric (GE) and Bank of America (BAC). Even though I have considered both stocks to be intelligent investments these past few years, I recognized that earnings growth and P/E expansion would be the drivers of total returns, but the share repurchases couldn’t be relied upon to build wealth in the face of garish stock options to the executives of the firms.
Since General Electric sold off nearly $30 billion in GE Capital to purchasers that include Wells Fargo and The Blackstone Group, it has been engaging in a stock buyback program so enormous that it dwarfs the stock-based compensation paid to General Electric’s management.
Specifically, General Electric trailed only Apple in largest amount of dollars spent repurchasing stock during the last quarter. They repurchased $7.6 billion of their own stock … Read the rest of this article!