Little wonder, then, that just as the Fed was raising rates and everyone was rushing to sell down stocks, companies that bought back their own shares did relatively better than those that did not buy back any of their own shares or only paid out dividends. In 2021, the world’s biggest purchasers of their own stocks were iPhone maker Apple, software behemoth Microsoft, social media supremo Facebook’s owner Meta Platforms, search giant Google’s parent Alphabet, and another large software firm Oracle. Those five firms accounted for 28% of buybacks in the US. In 2022, the order of the top five companies buying back their own shares changed slightly, with the oil giant ExxonMobil replacing Oracle.
The year 2022 was a bad one for global investors as the US Federal Reserve raised interest rates at a record pace to tame runaway inflation in the aftermath of the Covid-19 pandemic, widespread supply chain shocks and a shortage of workers in key sectors. The main US benchmark, S&P 500, fell 18% last year, while earnings for the 500 component companies in the index grew 4.6% during the year. Tech stocks were hammered the hardest, with the Technology Sector Select SPDR ETF, or XLK — one of the more widely used tech indices — down 29%.
Yet, overhyped large-cap tech stocks weathered the storm much better than other counterparts. Since the start of the year, big tech stocks have outperformed the market. Here’s why: Global tech giants also have the largest cash hoards and are the biggest purchasers of their own shares.
