GOLDMAN: You have until about April 13 to buy stocks on dips
Goldman Sachs' Amanda Sneider argues that a good time to buy a stock is before a company announces a big share repurchase plan.
Since 2009, S&P 500 companies have bought back a whopping $2.1 trillion worth of their own stock. The pace of these buybacks actually hit a record high in February. Many folks believe this aggressive buying by corporations has had at least some positive impact on stock prices, which have been in a bull market for six years.
However, since February, buyback chatter has dissipated. But that is more a calendar matter than a change in corporate financial planning.
"The majority of companies just entered the buyback blackout period leading into the 1Q 2015 reporting season," Goldman's Sneider said. In other words, these companies will not be making any major announcements until they release their quarterly earnings reports sometime in mid-May.
"Roughly 70% of S&P 500 firms will report 1Q results during a three-week period between Monday, April 13, and Friday, May 1," Sneider noted.
"We expect S&P 500 firms will boost repurchases by 18% to $604 billion in 2015," she added.
But as we wait, we could see weakness in stock prices, which Sneider thinks is good news for people with some cash to invest.
"Investors should view any market pressure as a buying opportunity," she said. "High valuations in the absence of corporate demand may weigh on stock prices. However, we expect the market will climb to 2150 around mid-year 2015 ahead of the anticipated September Fed tightening and as corporate buyback activity resumes once earnings season ends."
Sneider recommends investors buy a basket of companies "focused on returning cash to shareholders via buybacks and dividends."
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