U.S. Companies Surpass $1 Trillion in Buyback Announcements

Michael Schoonover, COO & Portfolio Manager
Michael Schoonover is Chief Operating Officer of Catalyst Capital Advisors LLC and Rational Advisors, Inc. and Portfolio Manager of a share buyback strategy fund at Catalyst Funds. He began his association with Catalyst in 2011 as a research consultant supporting the implementation and back testing of quantitative strategies. In March 2013, he became a senior analyst at Catalyst to provide investment research for several mutual funds. From 2005-2011, he served in various technical and scientific management roles with the Perrigo Company. Mr. Schoonover has an MBA with high distinction from the University of Michigan Ross School of Business and a BS from the University of Michigan.

Over $70 Billion of Buybacks in December Continues Record for 2018

As of mid-October 2018, U.S. companies already set a record for authorizing share buybacks, surpassing the previous 2015 record of just over $800 billion in buyback authorizations. With the recent increase in market volatility, however, U.S. companies have significantly ramped up share repurchase authorizations, which can benefit investors by improving shareholder value, bolster stock prices, and creating beneficial tax opportunities. As a result, the more than $70 billion in authorizations this month as of December 14 have now pushed 2018’s total authorizations to $1.05 trillion.

Our February prediction that 2018 would surpass the $1 trillion threshold was driven by company reactions to the new tax environment, including lower corporate tax rates and the ability to repatriate a significant portion of the $2.6 trillion in overseas profits.

Despite the record-setting buyback authorization levels, 2018 has been an unusual year in that fewer companies are accounting for the total buybacks. In fact, when only looking at buyback authorizations worth more than $250 million, 387 companies made 440 announcements totaling $1.02 trillion. The remaining sub-$250 million announcements (approximately 400 total announcements) accounted for just over $30 billion in authorizations. In fact, only 740 companies out of the approximately 3,000 in the Russell 3000 Index authorized buybacks this year. This suggests that 2019 is poised to be another strong year for buybacks, especially if some of the market headwinds subside.

Figure 1: Technology Led the Way this Year

Sector Buyback Amount ($ billions)
Information Technology $366
Financials $184
Health Care $133
Consumer Discretionary $110
Industrials $75
Consumer Staples $61
Communication Services $42
Energy $40
Materials $28
Real Estate $7
Utilities $3

Source: Bloomberg LP, FactSet, and Catalyst Capital Advisors LLC.

Figure 2: 26 Companies Announced a Buyback $10 Billion or Larger for More than $530 Billion

Ticker Buyback Amount ($ billions)
AAPL US Equity $100.0
QCOM US Equity $40.0
WFC US Equity $39.8
CSCO US Equity $25.0
UNH US Equity $24.6
ORCL US Equity $24.0
JPM US Equity $20.7
BAC US Equity $20.6
AVGO US Equity $18.0
FB US Equity $18.0
C US Equity $17.6
LOW US Equity $15.0
AMGN US Equity $15.0
PEP US Equity $15.0
ABBV US Equity $15.0
NKE US Equity $15.0
INTC US Equity $15.0
SBUX US Equity $12.8
TXN US Equity $12.0
MU US Equity $10.0
WBA US Equity $10.0
PYPL US Equity $10.0
CAT US Equity $10.0
MRK US Equity $10.0
MMM US Equity $10.0
PFE US Equity $10.0

Source: Bloomberg LP, FactSet, and Catalyst Capital Advisors LLC.