Warren Buffett has yet to publicly comment on it, but CNBC reported it is not likely the investment guru will be a big fan of the new Democratic Party war on stock buybacks.
The billionaire investor and chairman and CEO of Berkshire Hathaway, has said in the past that he believes stock buybacks can often be the best use of corporate cash, CNBC reported.
Stock buybacks refer to the repurchasing of shares of stock by the company that issued them.
Meanwhile, two top Senate Democrats said they’ll introduce legislation barring companies from buying back their own stock unless they first increase workers’ pay and benefits, as the party seeks to frame 2020 election issues by spotlighting corporate responsibility, Bloomberg reported.
Senate Minority Leader Chuck Schumer and Senator Bernie Sanders, who is considering a second run for the Democratic presidential nomination in 2020, wrote in a New York Times opinion piece Monday that their plan would require companies pursuing buybacks to take such actions as raising workers’ minimum pay to $15 an hour, improving pensions or offering seven days of paid sick leave.
“At a time of huge income and wealth inequality, Americans should be outraged that these profitable corporations are laying off workers while spending billions of dollars to boost their stock’s value to further enrich the wealthy few,” the two wrote. They pointed to recent decisions of companies including Walmart Inc. and Wells Fargo & Co. to repurchase billions of dollars in shares at about the same time they cut jobs.
Berkshire has recently been increasing its buyback activity, CNBC explained. Buffett’s largest stock holding, Apple, has completed eight of the 10 largest quarterly buybacks ever.
Speaking about Apple at the 2018 Berkshire Hathaway annual meeting, CNBC reported that Buffett said, “I’m delighted to see them repurchasing shares. ... You can say we own 5 percent of it. But I figure with, you know, with the passage of a little time we may own 6 or 7 percent simply because they repurchase shares. ... I find that if you’ve got an extraordinary product, and ecosystem, and there’s lots to be done, I love the idea of having our 5 percent, or whatever it may be, grow to 6 or 7 percent without us laying out a dime. I mean, it’s worked for us in many other situations.”
At the 2016 meeting, CNBC reported that Buffett said that buyback plans were getting “a life of their own, and it’s gotten quite common to buy back stock at very high prices that really don’t do the shareholders any good at all.” He added, “It’s fashionable and they get sold on it by advisors.”
Meanwhile, Barron's recently reported that it’s been raining stock buybacks on Wall Street this year, and the outlook appears to be for another downpour in 2019.
Buybacks appear to be nearing a crescendo, with total U.S. stock repurchase announcements crossing the $1 trillion mark in mid-December for the first time, according to Michael Schoonover, the portfolio manager of the Catalyst Buyback Strategy fund (ticker: BUYIX).
“There’s been a significant pickup in recent weeks,” with markets in a downdraft, he told Barron's.
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