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In Yahoo, Another Example of the Buyback Mirage – The New York Times

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Companies can play games to make some of these ratios look better, just as EPS and, as a result, P/E.  Like Buffett always says, when you buy a stock, you need to evaluate the company as if you were buying the entire company.  That is the only true way to calculate the intrinsic value of the shares that you are buying.

It is one of the great investment conundrums of our time: Why do so many stockholders cheer when a company announces that it’s buying back shares?Stated simply, repurchase programs can be hazardous to a company’s long-term financial health and often signal a management that has run out of better ways to invest in the business.And yet investors love them.Not all stock repurchases are bad, of course. But given the enormous popularity of buybacks nowadays, those that are harmful probably outnumber the beneficial.

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