Looking at a day’s FTSE 250 stock market news, I see numerous share buyback updates. I like share buybacks, as they should lead to future dividends being spread across fewer shares for better yields.
I also like it when companies think their own shares are worth buying at current prices. And the number of them doing so gives me a positive feeling towards the stock market.
So today, I’m examining some smaller companies providing share buyback updates. I count no fewer than 19 in the FTSE 250 reporting share repurchases in a single day.
I see a number of companies related to the construction business buying back their own shares. And that’s at a time when people are fearing for the housing sector.
Construction sentiment
It includes Balfour Beatty, on a programme to return up to £150m through repurchases. The company says it could take until December to complete. Housebuilder Vistry is doing it too, as part of a more modest £35m buyback. Vistry is also paying fat dividends, so there doesn’t seem to be any shortage of cash there.
Companies providing materials and fixtures and fittings to the building trade are also buying back their own shares. On the same day as the above, we saw repurchase updates from Howden Joinery Group, Grafton Group Units, and even brick maker Ibstock.
A number of FTSE 100 companies in the housing and construction business are also doing the same, so it’s not just smaller FTSE 250 firms. This is a sector hit by weak investor sentiment as a result of our tough economic outlook. Yet they all have appear to have cash to spare.
Troubles? What financial troubles?
Financial sector shares are also down in the dumps right now. That includes banks, financial service providers, investment managers… in fact, the whole lot.
But we’d never guess, judging by the ongoing share buybacks. There’s hedge fund manager Man Group and fund manager Liontrust Asset Management. And we see technology and growth investors Allianz Technology Trust, Witan Investment Trust, and Polar Capital Technology Trust.
Trading services provider CMC Markets is doing it too, as is consumer lender Paragon Group Of Companies.
I won’t list every FTSE 250 company currently engaged in share buy backs. But I think looking at these firms in these two sectors is quite telling. Unlike in the US, we’ve avoided a technical bear market in the UK so far. But judging by the daily headlines, investor sentiment is very bearish.
Is the market wrong?
And investors have been largely fleeing the finance and construction sectors.
So what do I take from all of this? Well, firstly, I want to stress that I would never buy shares in a company based solely on the existence of share buybacks. Every one I’ve listed here will face its own individual risks, and every one should be researched carefully.
But the mismatch between investors and companies liking their own share prices enough to buy them, suggests to me that today’s market sentiment is wrong. These buybacks give me investment candidates to investigate further.
