Who’s Still Buying Stocks Near Record Highs?

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A market consists of buyers and sellers coming together in order to facilitate an exchange of goods or services. One of the most famous examples is the stock market, where shares of companies are traded on a daily basis as prices fluctuate, enticing participants to make a deal. However, with major indexes near record highs, who are the buyers and sellers?

Out of six major groups of investors, only two are net buyers: companies and individuals. After reducing purchases during the depths of the financial crisis, companies are now the biggest buyers of stocks, according to a new analysis by LPL Financial Research using data from FactSet. During the first quarter of 2014, S&P 500 companies bought approximately $160 billion worth of shares, representing the second-biggest quarterly haul in history. The record stands at $172 billion set in the third quarter of 2007, shortly before the worst financial downturn since the Great Depression.

“Corporations have been decreasing the amount of shares in the market for 10 straight quarters. Over the past year, this has amounted to about 3 percent of shares outstanding in the S&P 500,” said Jeffrey Kleintop, chief market strategist at LPL Financial. “Corporations have become net buyers of shares as rising cash flow and wide profit margins compel them to shrink their share count to boost earnings per share, as revenue growth has been sluggish.”

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