Buyback Wednesdays – YUM Brands and Corteva Announce $2 Billion Buybacks Each

The challenging macro economic environment we find ourselves in is the elephant in the room that has to be addressed before we can dive into our regular programming of discussing stock buyback activity. The higher than expected CPI numbers released on Tuesday and especially the persistently high core CPI numbers shook the markets and triggered a huge decline in most indices. I wrote the following about the CPI print on Twitter on Tuesday.

Institutions paid heed to the strong warning signal that Fed Chair Jay Powell provided last month and purchased protection. I wrote about it in more detail in our last monthly special situations newsletter as well as in the following tweet last week.

Unless the Fed’s resolve wavers, we are likely to fall into a recession and equities as well as bonds have further downside. It was hard to fathom just a few months ago that 30 year mortgage rates would have eclipsed 6% by September. Once the rates on adjustable rate mortgages start to adjust, the impact will be felt more acutely. Consumers are likely to start pulling back on discretionary purchases first and interest rate sensitive sectors (REITs for example) or companies that are heavily indebted are likely to be the hardest hit. Given the high premiums on put options, I decided not to buy index put options and instead chose to scale back exposure and have a larger than usual allocation to merger arbitrage.

Getting back to our regular programming, buyback activity picked up significantly with 17 companies announcing buybacks last week.

Wireless carrier, T-Mobile US (TMUS) announced a $14 billion share buyback program. This program will run through September 30, 2023, and represents around 8% of its $181.71 billion market cap at announcement. Bucking the general market trend, T-Mobile has seen its stock go up more than 20% year-to-date.

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