Last week we published a post about recent share buybacks. In that post, the article we referenced
noted that the 100 stocks with the biggest buybacks had outperformed
the S&P 500 by 10 percentage points in 2013, but trailed the S&P
500 by about 1 percent in the first quarter of 2014. As we like to
caution our students - Be careful of numbers. A more recent article
about share buybacks notes that the top 100 repurchasers have
outperformed the S&P 500 by about 1 percent so far this year, a
reversal from the previous article. So, while the companies with the
largest buybacks didn't outperform the S&P 500 in the first quarter
of 2014, they did in the second quarter.
While this is
interesting, the more important point for you going forward is to
critically examine historical numbers. Just because something happened
in the past does not mean that it will occur in the future, or, in this
case, just because a past relationship doesn't hold during a specific
time period doesn't mean that that relationship won't continue in the
future. In short, a sense of skepticism is a healthy thing when dealing with historical numbers.
