tag:blogger.com,1999:blog-7294165939647321702.post8035884661535129105..comments2024-03-11T10:31:06.107-04:00Comments on <center><a href="http://www.barelkarsan.com">Barel Karsan - Value Investing</a></center>: Netflix's Awful BuybacksSaj Karsanhttp://www.blogger.com/profile/04493152766022812984noreply@blogger.comBlogger2125tag:blogger.com,1999:blog-7294165939647321702.post-21564984642775214702011-09-22T22:05:16.737-04:002011-09-22T22:05:16.737-04:00A lot of the buybacks were done to offset dilutive...A lot of the buybacks were done to offset dilutive, extremely generous option grants to Hastings and other execs. So it's even worse. A lot were done as bad capital allocation and a lot were done to cover an expense that wasn't properly accounted for.Hesternoreply@blogger.comtag:blogger.com,1999:blog-7294165939647321702.post-89621602464807082142011-09-22T17:57:14.269-04:002011-09-22T17:57:14.269-04:00Good stuff as usual. I agree with you on Netflix w...Good stuff as usual. I agree with you on Netflix wholeheartedly, but those buybacks in aggregate that occurred from 2004-2007 (and picked up again post-crisis) seem rational. There is a wide spread now between the average earnings yield on stocks and corporate bond yields.<br /><br />Investors for whatever reason - maybe they are nervous after two massive bear markets in 10 years, or they are baby boomers retiring - have shunned equities in favor of fixed income. This has caused a spread between earnings yields and corporate bond yields that hasn’t existed in a long time. It has created an opportunity for some corporations (where there balance sheet can stand it and it’s a decent business) to issue debt and buyback stock and boost eps and return on equity. It’s balance sheet arbitrage for corporations. For those who ignore it, they make for attractive LBO targets.<br /><br />I’m thinking the next 10 years will witness an unprecedented move by large corporations that end up going private as a result.Anonymousnoreply@blogger.com