buybacks

buybacks

About 13.8% of S&P 500 issues “substantially” reduced their year-over-year share out in the second quarter, compared with 26.6% in the second quarter of 2016, as well as the 14.8% that did in the first quarter of this year. Sixty-six issues in the S&P reduced their share count by at least 4%, a level that is seen as having an impact on EPS, down from 134 in the year-ago period and 71 in the first quarter of 2017.

The reduction in buybacks isn’t necessarily a signal that companies view their own shares to be overvalued. Silverblatt said investors were interpreting the decline as “a positive sign,” because “while there is less support for EPS growth, companies are showing an ability to meet their EPS targets without the buyback tailwind, as their Q2 2017 record earnings show.”

The political environment in Washington, D.C., could also be a factor behind the lower repurchasing activity. Last year, Goldman Sachs forecast that S&P 500 companies would spend $780 billion on buybacks in 2017, buoyed by corporate tax reform and the repatriation of cash from overseas, two factors that investors expected this year that haven’t come to pass. Companies could be waiting for such legislation to be enacted before they ramp up their programs; the last time there was a one-time tax on the untaxed foreign profits of U.S. multinational stocks, buyback executions jumped 84%, according to Goldman.

Part of the decline in buybacks was due to Apple Inc. AAPL, +0.04%  The company, the largest in the economy by market capitalization, spent $7.1 billion on buybacks in the second quarter, down from $10.2 billion in the second quarter of 2016. The overall technology sector spent $27.6 billion on buybacks in the quarter, up 0.5% from the first quarter of 2017. Tech represents 23% of all buybacks, according to S&P.

The top 20 companies for buybacks accounted for 38.6% of all repurchases in the quarter, the lowest recording for a top 20 since the fourth quarter of 2015, according to S&P.