Large Cap Share Buyback Model

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If a company is confident enough to buy itself…shouldn’t we?

When a company purchases its own stock, either on the open market, or directly from its shareholders, it’s known as a share or stock buyback.

Share buybacks are commonly used to create or enhance shareholder value in a number of different ways.  A share repurchase plan can be a good way for a business to reinvest in itself, by using any excess cash at its disposal to buy back shares of its own stock. This is usually a welcome sign that a company is in a positive cash flow situation, and it often serves as a catalyst to increase the company’s stock price at the same time, further increasing shareholder value.

The iQ Large Cap Share Buyback Model represents an equal-weighted portfolio of large and blue-chip stocks that have purchased their own stock the last twelve months.

Process:

  1. Start with the largest 500 domestically-traded companies

  2. Select the 100 companies with the highest 12-month share buyback ratio.

  3. Screen by Value, Momentum and 5-year Beta and select the top 30

  4. Screen by risk-adjusted price momentum and select the top ten.