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This choice doesn't exist. The market is not 100% efficient, but it's not extremely far from it either. Share prices are not something you can 'grow'. The com

This choice doesn't exist. The market is not 100% efficient, but it's not extremely far from it either. Share prices are not something you can 'grow'. The company's future prospects change, and that affects share prices. If the companies will start targeting B, then the market will (very quickly) learn that this doesn't work (i.e. lot of people lose their money because they buy close to the top), and then share prices won't increase. Person A, B, C don't exist in isolation. C _is_ concerned by share price growth because growing share price still means (despite all the bullshit people read and believe about investing) that the expected future dividends will increase. Person B _does_ care about long-term prospects because he's not the only smart guy in the town and if the company is doomed in the long run then chances are somebody else will sell before B sells. Person A _does_ care about short-term growth -- again because he's not the smartest all the time therefore if the share price drops today then it's usually a good signal about the prospects of tomorrow (I hope nobody argues with that -- if one does, then he's free to make a fortune on the stockmarket...). D and E is a completely separate story.

7Figures2Commas 12y ago
> Share prices are not something you can 'grow'. Tell that to companies that have used the ZIRP environment to borrow cheap money to buy back their shares. According to Barclays, companies with the largest buyback programs have outperformed the market by 20% since 2008[1]. [1] http://online.wsj.com/articles/companies-stock-buybacks-help-buoy-the-market-1410823441 http://online.wsj.com/articles/companies-stock-buybacks-help...
- enoch_r 12y ago
  Ex ante returns are not the same as ex post returns. Borrowing cheap money to buy an S&P500 ETF would have paid off handsomely since 2008, because the market's gone up. If the market had crashed, you'd be in trouble. Similarly, given the fact that the market as a whole has gone up in period X, it should be no surprise that companies buying their own stock on margin have outperformed the market.
- sz4kerto 12y ago
  That's something different -- share buybacks are the same as dividend payments.
  - 7Figures2Commas 12y ago
    They often have similar effects but no, they are not[1]. This notwithstanding, you stated unequivocally that "share prices are not something you can 'grow'" when it is evident that companies have a number of tools at their disposal that can be used quite effectively to manipulate share price, especially over shorter periods of time and in certain kinds of markets. [1] http://aswathdamodaran.blogspot.com/2014/09/stock-buybacks-they-are-big-they-are.html http://aswathdamodaran.blogspot.com/2014/09/stock-buybacks-t...

7Figures2Commas 12y ago

> Share prices are not something you can 'grow'. Tell that to companies that have used the ZIRP environment to borrow cheap money to buy back their shares. According to Barclays, companies with the largest buyback programs have outperformed the market by 20% since 2008[1]. [1] http://online.wsj.com/articles/companies-stock-buybacks-help-buoy-the-market-1410823441 http://online.wsj.com/articles/companies-stock-buybacks-help...

enoch_r 12y ago
Ex ante returns are not the same as ex post returns. Borrowing cheap money to buy an S&P500 ETF would have paid off handsomely since 2008, because the market's gone up. If the market had crashed, you'd be in trouble. Similarly, given the fact that the market as a whole has gone up in period X, it should be no surprise that companies buying their own stock on margin have outperformed the market.
sz4kerto 12y ago
That's something different -- share buybacks are the same as dividend payments.
- 7Figures2Commas 12y ago
  They often have similar effects but no, they are not[1]. This notwithstanding, you stated unequivocally that "share prices are not something you can 'grow'" when it is evident that companies have a number of tools at their disposal that can be used quite effectively to manipulate share price, especially over shorter periods of time and in certain kinds of markets. [1] http://aswathdamodaran.blogspot.com/2014/09/stock-buybacks-they-are-big-they-are.html http://aswathdamodaran.blogspot.com/2014/09/stock-buybacks-t...