Update - September 8, 2020

Why Stocks Are in the Red

Stocks have spent the last three days in the red.

Is it a surprise?

No.

Is it a sign of a turnaround?

No.

Should we be celebrating?

Keep reading.

For many, many months, I’ve been writing about the virtues of stock buybacks. They were one of the largest drivers of the record-breaking bull run we saw over the last decade.

But if share buybacks push stocks higher, wouldn’t share offerings push them lower?

For that answer, just look at Tesla (TSLA) shareholders today. You may want to hand them a tissue.

Shares of the speculative giant are down nearly 30% since September. A lot of that loss came today.

Not helping the situation was news from Elon Musk last week of a massive $5 billion share offering. It’s nearly the exact opposite of a buyback… and has the opposite effect.

It was a smart move by the company.

It allowed Tesla to grab $5 billion out of the pockets of investors while they were in quite a feeding frenzy. Now it’s up to the company to pay them back by turning that cash into even more cash.

Meanwhile… the buyback train is picking up speed one headline at a time.

All Aboard… Goooooing Up

American Banker just reported that more than a dozen small banks have announced buyback plans in the last two weeks.

The folks behind those decisions said loan losses have been lower than expected and profit performance has been strong.

That’s good news from the nation’s in-the-trenches banks.

You can bet their bigger brethren are drooling at the opportunity. But in the heat of the COVID-19 crash, many of the nation’s biggest banks pledged not to buy any shares for the next six months.

The clock is ticking…

Meanwhile, Intel (INTC) made headlines a few weeks ago when it announced a major $10 billion repurchase plan. As expected, its shares climbed heavily on the news.

And this isn’t just an American trend. In fact, in what is surely foreshadowing what’s ahead, many of China’s major firms have been on a share buying spree.

Baidu (BIDU), in fact, recently announced it was tripling its repurchase authorization. It’s worth $3 billion now.

That’s why I’m excited to have a stock like Logitech (LOGI) in our portfolio.

It continues to buy its shares on the open market… and it continues to reward shareholders.

With the ability to purchase up to 270,000 shares per day, the plan creates a bit of a floor under the share price. Surely the company will be looking to buy on any sizable dips.

That’s why I urge you to grab shares of the company now if you don’t already own them.

This downturn won’t last forever. The Fed is gearing up to speak next week. And Washington is once again in stimulus mode.

The bulls could come back at any time.

When they do, you’ll be glad you bought shares of Logitech on a dip.

It’ll be another reason to celebrate.

Be well,

Andy