The Compound
The Worst Traders in the World
10/14/2025, 11:40:55 PM
Economic Summary
- Many companies tend to announce or expand buybacks after their shares have already risen strongly over the prior 12 months, implying poor timing that can result in buying at market highs and reduced shareholder value (example placeholder: XYZ).
- A disciplined policy, exemplified by Berkshire Hathaway (BRK.B) setting a buyback threshold (e.g., below 1.3x tangible book), can avoid overpaying and align repurchases with intrinsic value, but such thresholds are rarely met so buybacks may be limited in practice.
Bullish
- Disciplined buybacks below valuation can preserve capital and create long-term shareholder value.
- Buyback announcements can signal management confidence and support share prices.
Bearish
- Companies often execute buybacks after large price run-ups, effectively buying high and worsening returns.
- Management bias leads CFOs/CEOs to repurchase at peaks rather than opportunistically.
Bullish tickers
BRK.B
Bearish tickers
XYZ
BRK.B
Bullish
Uses a valuation-based buyback policy (buy below tangible-book multiple), avoiding overpaying and protecting capital.
Bearish
May rarely buy because its valuation threshold is seldom met, limiting the effectiveness of buybacks.
XYZ
Bullish
Buyback announcements can reflect management confidence and may temporarily support share prices.
Bearish
Companies like this often double down after big rallies, buying back shares at elevated prices and hurting returns.