There's a simple motto that sums up how to invest: Buy low, sell high. It sounds easy, but it's more difficult in practice. However, there are ways for investors to maximize their chances of buying low and selling high.
One is to hold onto investments for a long time, thus giving the power of compounding more time to work its magic. Another way is to identify and invest in companies that repurchase a lot of their own shares. Here I'll cover three such companies, and explain why those share buybacks are so useful for investors.
Meta Platforms First up is Meta Platforms ( META -0.05% ) . Thanks to the company's enormous share of the fast-growing digital advertising market, Meta has quickly become a cash-printing machine.
In its most recent quarter (the three months ending on March 31, 2024), Meta generated $12.5 billion in free cash flow. This river of cash enabled the company to return value to shareholders through share buybacks (totaling $14.
6 billion in the quarter) and, for the first time ever , a quarterly dividend payment of $0.50/share. Granted, the payouts (share buybacks and dividends) exceeded the company's free cash flow, but the company's massive cash reserves of $58 billion easily covered the deficit.
In any event, Meta reduced its overall shares outstanding by 11% over the last five years. That's great news for investors, because as the number of outstanding shares decreases, the value of each remaining share increases. And that's the beauty of stock buybacks : T.