One of the Best Market Signals You Can Get

The Death of an Industry When the horse and buggy "died out," investing in the automobile business could have turned $2,400 into $14 million!!! When computers replaced typewriters, it happened again. And when MP3s replaced CDs, a whole new crop of investors got filthy rich. Now, these are all extraordinary examples of legendary innovations. Investing stories like these don't happen every day (or every year for that matter)... But the truth is, we believe the next great moneymaking opportunity could be upon us right now with "The Death of Cable TV." Here's why... Monday, May 12, 2014 | Issue #2289 One of the Best Stock Market Signals You Can Get Alexander Green, Chief Investment Strategist, The Oxford Club In the first four months of this year, U.S. companies bought back $255 billion worth of their own shares. That is no small sum, but it is significantly less than the $355 billion worth they purchased in the same period last year. The declining pace of buybacks has some analysts fretting that this is a bearish signal. It's not. The important question is not the aggregate amount of buying but rather "who is buying and how much?" Academic studies have consistently found that the average stock not only rises immediately after the announcement of a repurchase program but continues to beat the market for several years. The correlation between buybacks and stock outperformance is not hard to understand. There are two primary reasons. The first is when management feels so strongly that the company's shares are mispriced that they are willing to invest hundreds of millions of dollars of the company's money to repurchase the stock in the open market, they are essentially betting their jobs that the company's shares are undervalued. I say that because those responsible for the decision are unlikely to keep their seats in the boardroom if the stock finishes the buyback period significantly lower than it was at the beginning. The other reason is mathematical. When you divide earnings by a smaller number of shares outstanding, you get higher earnings per share. And that's what ultimately drives share prices northward. Top Ten Benefits of This Silver Currency Get the benefits of both fiat currency and precious metals - all the divisibility, liquidity, and acceptability of fiat currency. But keep the benefits of precious metals as a hedge against inflation, opportunity for investment, and low premiums. This is one of the most popular ways to own silver for rainy days, investments or even bartering. Give your portfolio the silver lining of security today. SPONSORED Do Your Research However, a little due diligence is in order. Buybacks often do nothing more than offset the dilution that occurs when senior executives exercise their options, buying shares at a huge discount to the market and then selling them immediately to lock in the gain. In that case, the number of shares outstanding remains largely unchanged. You need to make sure the number of shares outstanding is actually declining. Also, it's important to note that companies sometimes announce their "intention" to buy back shares but do not always follow through. The financing or cash flow may not be available. Industry conditions may take a turn for the worse. Or management may simply change its mind. But when the buyback proceeds apace and the number of shares outstanding declines, it's a good thing. And, over time, buybacks can be significant. For instance, in 1993 IBM had 2.3 billion shares outstanding. However, by regularly buying back shares in the open market, the number of shares outstanding has shrunk by about 1% per quarter. Today it has only 1.1 billion shares out, less than half as many as it had two decades ago. The Oracle's on Board Someone who clearly approves of this strategy is Warren Buffett. His holding company, Berkshire Hathaway (NYSE: BRK), is the single largest IBM shareholder, with 6.7% of the outstanding shares. Other companies that are currently in the midst of heavy share repurchases include Apple (Nasdaq: AAPL), Sirius XM (Nasdaq: SIRI), Lam Research (Nasdaq: LRCX), Forrester Research (Nasdaq: FORR), Intuitive Surgical (Nasdaq: ISRG), Tesco Corp. (Nasdaq: TESO) and DST Systems (NYSE: DST). There are funds that target companies with major buybacks, too. One is PowerShares Buyback Achievers (NYSE: PKW). Another is TrimTabs Float Shrink ETF (Nasdaq: TTFS). Both funds have low expenses and have outperformed the market by a wide margin since inception. Count me unsurprised. The companies they buy are reducing the share count and returning capital to investors. That's one of the best stock market signals you can get. Good investing, Alex P.S. Sure, share buybacks are one great market signal. But Alex has developed an entire matrix of signals that work together to deliver winner after winner, almost every time. These Predictive Protocols may be the most important factor to Alex's legendary success as a stock picker. And readers who act quickly have a chance to get in on them... for free. Click here to learn more. Click here to post a comment on InvestmentU.com OBAMA'S TO BLAME! It sounds unbelievable but... There's an event that could shut down the entire U.S. power grid for "at least 18 months, probably longer..." according to a federal memo. Some suggest the situation is already taking shape... But don't panic yet... Click here for the only way to protect yourself, your family and your finances. 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