Stock Buyback

A stock buyback (or share repurchase) occurs when a company buys back its own shares on the open market. This reduces the total number of shares outstanding, which mechanically increases earnings per share (EPS) even if net income stays flat. For shareholders who don't sell, their ownership percentage in the company increases.

Buybacks are often viewed as a signal of management confidence — they suggest that executives believe the stock is undervalued and that the company has excess cash it can't invest productively elsewhere. However, critics argue that some companies buy back stock at inflated prices or use cheap debt to fund buybacks, which can destroy long-term value.

Example: Apple spent over $85 billion on buybacks in fiscal year 2023 alone. Since 2013, Berkshire has reduced Apple's share count so dramatically that Berkshire's ownership stake grew from 5.4% to over 9% without buying a single additional share.

Buyback activity is one of the signals tracked in BMInsider's Smart Money Tracker — companies with aggressive repurchase programs often appear in institutional portfolios.