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Fundamentally this is the corporation saying it doesn't have a market-beating way to reinvest this capital Isn’t that the crux of it, though? Running a company

Fundamentally this is the corporation saying it doesn't have a market-beating way to reinvest this capital Isn’t that the crux of it, though? Running a company into the ground by not investing in growth or R&D? We give tax credits to corporations to incentivize R&D spending

missedthecue 1y ago
There aren't always infinity positive return ideas to invest in. Sometimes there really aren't any. Garrett Motion is a company that manufactures turbochargers and sells them to the big three automakers. It's a decently steady and profitable business but it's slowly on the way out. EVs don't need turbochargers. They have a small R&D division looking into EV inverters, and they'll continue to make turbochargers for non-auto applications, but for the most point, they are a melting ice cube and their CEO tells you this in plain terms on earnings calls. But their stock is priced like it too, so they are plowing most of their free cash flow into buying back shares, and it more than offsets the melt. The result? Their shares are steady and up about 95% over the past 5 years despite overall revenue decline across this period. Sure, you could have this sleepy turbocharger factory start investing in real estate, or get into uranium mining, or begin trying to write and sell cloud computing software. But their strategy is to keep making a good product and regularly eat up stock to overcome declining earnings per share, and it's working rather nicely.
ivewonyoung 1y ago
That was considered a tax loophole by the last administration so the R&D exception was allowed to expire in 2022 and only recently restored by the new admin.
- conradev 1y ago
  R&D tax credits did not “expire". Immediate expensing expired in 2022, requiring companies to split credits across multiple years. Multiple attempts since then have tried to restore expensing (often in bipartisan tax packages), but Congress hasn’t passed a permanent fix.
  - ivewonyoung 1y ago
    > but Congress hasn’t passed a permanent fix The new admin just did that last month in the Big Beautiful Bill.

missedthecue 1y ago

There aren't always infinity positive return ideas to invest in. Sometimes there really aren't any. Garrett Motion is a company that manufactures turbochargers and sells them to the big three automakers. It's a decently steady and profitable business but it's slowly on the way out. EVs don't need turbochargers. They have a small R&D division looking into EV inverters, and they'll continue to make turbochargers for non-auto applications, but for the most point, they are a melting ice cube and their CEO tells you this in plain terms on earnings calls. But their stock is priced like it too, so they are plowing most of their free cash flow into buying back shares, and it more than offsets the melt. The result? Their shares are steady and up about 95% over the past 5 years despite overall revenue decline across this period. Sure, you could have this sleepy turbocharger factory start investing in real estate, or get into uranium mining, or begin trying to write and sell cloud computing software. But their strategy is to keep making a good product and regularly eat up stock to overcome declining earnings per share, and it's working rather nicely.

ivewonyoung 1y ago

That was considered a tax loophole by the last administration so the R&D exception was allowed to expire in 2022 and only recently restored by the new admin.

conradev 1y ago
R&D tax credits did not “expire". Immediate expensing expired in 2022, requiring companies to split credits across multiple years. Multiple attempts since then have tried to restore expensing (often in bipartisan tax packages), but Congress hasn’t passed a permanent fix.
- ivewonyoung 1y ago
  > but Congress hasn’t passed a permanent fix The new admin just did that last month in the Big Beautiful Bill.