O’Shaughnessy Asset Management examines whether the size of a company’s share repurchase program matters more than buybacks themselves. The paper argues that firms repurchasing more than 5% of shares often buy at cheaper valuations, challenging the view that buybacks are routinely mistimed and shareholder unfriendly.
High Conviction Buybacks
O’Shaughnessy Asset Management
Patrick O’Shaughnessy
Research
6 Pages
Key Takeaways
Conviction Signals Value: Since 1987, roughly 50% of high conviction buybacks occurred when stocks were in the cheapest market quintile, versus just 28% for low conviction buybacks.
Stronger Historical Returns: High conviction buyback stocks returned 15.9% annually from 1987 to 2014, outperforming both low conviction buybacks at 12.2% and the market at 11.2%.
Consistent Outperformance Rates: High conviction buybacks beat the large stock benchmark in 98% of rolling 10 year periods, compared with 77% for low conviction buybacks.
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