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Our thoughts on the CBA buyback

Our Q&As are emailed in our Saturday Morning Report, find the answer to this question below.

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Our thoughts on the CBA buyback

Your thoughts please on the proposed buyback of CBA shares? It's pros and cons for shareholders?

Many thanks

Gregory

Answer

Hi Gregory,

Buybacks are often good news for investors short-term  because they reduce the number of shares on issue and by definition support or even push share prices higher.  Medium to longer term whether this is the best use of excess cash can be questionable. NAB for instance, issued equity near the lows and are now buying it back at significantly higher levels, the fact CBA did not need to issue shares at the lows will be  just another supporting factor for their dominance over the sector in years to come. We like CBA targeting ~$110 and covered their off market buy-back in a questions recently – answer can be found here. 

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Commonwealth Bank (CBA)
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