Is this the lifeline of a bull market?, Group repurchase of A-share companies! The three major US stock companies repurchased 730 billion yuan in net profit this year | META | A shares

Last week, more than 30 listed companies proposed buybacks. The valuation of A-shares is located in a global depression, and the dividend yield is also attractive compared to other major asset classes. However, market activity and confidence are still insufficient, and buybacks are a powerful tool to enhance investment activity and market confidence.

The three giants of the US stock market, Apple, Google, and META, have all risen by over 30% this year, and the rise of top heavyweight stocks has also driven the Nasdaq index to rise by over 30% this year. Behind the rise in stock prices of US stock giants is the massive share buybacks driving a journey of value discovery, with Apple, Google, and META's total buyback amounts so far this year approaching $100 billion.

Statistics show that the dividend amount of A-shares since the beginning of this year is about 1.79 trillion yuan, but the actual repurchase amount is only 20 billion yuan. The situation of insufficient repurchase is changing, and 30 companies including Daquan Energy and Paineng Technology issued repurchase announcements intensively last week.

The repurchase of listed companies has created buyers for light trading and increased market activity; US stock giants not only repurchased but also cancelled the repurchased shares. Apple has repurchased and cancelled about 40% of its total shares in the past 10 years. The act of repurchasing and canceling has increased the earnings per share of listed companies, which is beneficial for boosting investor confidence.

When the market lacks confidence and the company's value is significantly lower than the price, repurchase is the simplest and most direct way to increase shareholder wealth. In the early 1970s, the US stock market was also extremely sluggish, with the Dow closing at 995.15 points in 1965 and only stabilizing above 1000 points in the second half of 1982. During this period, Buffett specifically searched for companies that had undergone large-scale buybacks, believing that these companies typically have a dual characteristic of undervaluation and a management oriented towards shareholder interests.

US stock giants are not soft on buybacks

Apple's stock price has risen by over 30% this year and reached a historic high in July. Apple's performance showed a slight decline in the first two quarters of this year, with a year-on-year decrease of 9.19% in net profit attributable to shareholders in the first quarter and a slight decrease of 6.38% in the second quarter.

The decline in performance for a year or several quarters does not harm Apple's long-term competitiveness. The reason for Apple's stock price rising against the trend is not only due to a stable competitive landscape, strong customer stickiness, and abundant cash flow, but also related to the company's large-scale repurchase during weak performance, which enhances shareholder confidence in shareholding.

Apple has repurchased a total of $56.5 billion in the third quarter of this year. According to Business Insider, Apple has repurchased $588 billion in stocks over the past 10 years since 2012, with the repurchase amount exceeding the market value of 492 companies in the S&P 500 index.

Berkshire's position in Apple accounts for over 50% of its overall position. At Berkshire's annual shareholders' meeting in May this year, Buffett talked about Apple and said, "Apple is a very good company, better than the companies Berkshire owns, with high profit margins and user loyalty. Apple also has a big advantage of constantly buying back stocks. We don't need to do anything, and the market value of our holdings will increase." Buffett admitted that he made some mistakes two years ago by selling some Apple stocks, and said that decision was foolish at the time.

META's stock price has surged by 150% since the beginning of this year. META's net profit in the first quarter of this year was 5.709 billion US dollars, a decrease of 24% compared to the same period last year's net profit of 7.465 billion US dollars; The net profit for the second quarter of this year was 7.788 billion US dollars, a year-on-year increase of 16%. META also predicts in its financial report that expenses will increase significantly in both 2023 and 2024, citing an increase in both legal and infrastructure expenses, which are key to the artificial intelligence competition.

META has cumulatively repurchased $10.2 billion in the second quarter of this year, while in the fourth quarter of last year, META announced plans to repurchase $40 billion. In the past 5 years, META has repurchased approximately $70 billion in stocks.

Google's stock price has risen by 45% so far this year. Google achieved a net profit of $15.051 billion in the first quarter of this year, a year-on-year decrease of 8.43%. Google's net profit in the second quarter of this year was 18.368 billion US dollars, a year-on-year increase of 15%. Google repurchased $29.53 billion in the second quarter of this year. In the first quarter of 2022, Google announced a $70 billion repurchase, and in the first quarter of 2023, the company announced an additional $70 billion repurchase.

A-share repurchase still lacks a spark

On the evening of the 17th, over 30 A-share listed companies announced that their chairman, actual controller, or shareholder proposed to repurchase their shares. These companies are mostly listed on the Science and Technology Innovation Board, covering industries such as electronics, biopharmaceuticals, and technology.

The blue chip stocks with large amounts of cash and high dividend yields in A-shares are still stagnant. For these companies, repurchase and cancellation are not only beneficial for improving earnings per share, but also for improving the efficiency of fund utilization and enhancing the return on equity of the company.

Since the beginning of this year, repurchases by American companies such as Apple, META, and Google have approached $100 billion, but the total amount of A-share repurchases is only RMB 20 billion. Statistics show that the dividend amount of A-shares since the beginning of this year is 1.79 trillion yuan.

After Buffett invested in The Washington Post in 1973, The Washington Post made a massive repurchase at his suggestion. Buffett said that the overall growth rate of the company's business is not important, what is important is the growth rate of earnings per share. This is like dividing a pizza into fewer parts. If the company's stock can be repurchased at a low price, then each piece of pizza will receive more cheese.

The current valuation of A-shares is at a historic low, with some individual stocks having dividend yields of over 10%, and the company's monetary funds in its books reaching billions of yuan. These companies have the ability to repurchase shares after meeting necessary capital expenditures.

As Buffett said, "Our last way to create value is through repurchasing Berkshire's stock, and through this simple action, we have increased your share of many controlled and uncontrolled companies in Berkshire. When the price is below value, this path is the simplest and most certain way for us to increase your wealth."