Buybacks - "I remember days when APPLE, GOOGLE, Intel, MSFT..."
What P/E's did those companies trade at during those periods? No one can fault a company for not buying back its stock at P/E 40. But P/E 4 is a different story altogether.
Call me a cynic, but after having engaged extensively with this space, the sense I get is that Chinese companies are very stingy with their money. They raise more money via equity than similarly situated US companies, and they are less inclined to part with that money. For whatever reason.
Just look at how many offerings take place in this space. Essentially every day there is a new S-3 put out. Some companies offer once or twice a year. The same thing that inclines them to offer stock so frequently is what inclines them not to buy it back or distribute it.
You can think that it's all about aggressive acquisitions, but the problem is (1) we aren't really seeing aggressive acquisitions from companies with cash hoards and (2) there is no conflict between aggressive acquisitions and buybacks. CCME, for example, still hasn't acquired anything, despite carrying an obscene cash balance. They have plenty of room to buy stock and acquire whoever they want.
To be perfectly honest, I think it's more about what the cash confers onto the business. A business with $200MM in cash is a presence, it has clout, it's going to stick around, it offers security to its owners and employees. The CEO's inevitably view these companies as their own, they created the companies, they run the companies, and therefore it's understandable that they would want to keep the companies in a powerful, secure, "cash rich" status.
This may be a controversial point, but c'mon, let's be realistic here.
I'll readily admit that companies that I own have this exact mentality. It is simply one of the negatives of the space that we must accept in exchange for the low prices that we get as buyers.
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