Goldman Sachs' Expectation of Rise for Buyback Aristocrats

Expectations About Goldman Sachs' Buyback Aristocrats

Goldman Sachs consistently demonstrates that companies which engage in stock buybacks outperform the overall market. Goldman’s U.S. equity strategist David Kostin refers to these companies as "buyback aristocrats," noting that their share counts have decreased by 1% or more annually in at least nine of the last ten years.

Buyback Aristocrats and Market Performance

According to Kostin, the equal-weighted Buyback Aristocrats portfolio, which is restructured and balanced each year, has outperformed the equal-weighted S&P 500 by an average of 3 percentage points annually since 2012 and by 4 percentage points year-to-date. Stock buybacks serve as an important method for companies to return profits to their shareholders, similar to dividends, and also reflect management's confidence in the stock's valuation and performance.

Capital Expenditures and Stock Buybacks

Kostin points out that in recent years, buybacks have lagged behind capital expenditures. Particularly in 2021 and 2022, stock buybacks exceeded capital expenditures, but this trend has changed since late 2022 with the rise of investments in artificial intelligence.

2026 Predictions

Kostin forecasts an 11% growth in cash spending among S&P 500 companies in 2026 due to capital expenditures related to artificial intelligence and improving macroeconomic conditions. According to his estimates, about 50% of these expenditures will be allocated to capital expenditures and research and development, 43% to buybacks and dividends, and 7% to cash mergers and acquisitions.

Expectations of Increased Buybacks

Goldman also released a note suggesting that buybacks may increase this year. The current blackout period, during which companies have avoided buybacks around their balance sheets, is expected to end, and approximately 40% of companies are anticipated to continue buybacks after this period. Goldman expressed that companies may show more activity in the fourth quarter to achieve their end-of-year buyback targets.

Some of the Buyback Aristocrats

• Molson Coors Beverage (TAP)

The information provided herein does not constitute investment advice.