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Investors want CEOs to cut back on capex, stock buybacks: BofA

Yahoo Finance Live anchors discuss why investors want CEOs to cut back on capital expenditures and stock buybacks.

Video Transcript

[UPBEAT MUSIC]

- Investors are pushing CEOs to improve their balance sheets and spend less on capex and buybacks. That's according to the latest Bank of America Fund survey. Brian Sozzi has a take.

BRIAN SOZZI: Yeah, this one caught my attention. Because Walmart noted in its earnings release this morning that they are holding the line on capital expenditures-- expenditures this year despite their first-quarter-earnings miss-- saw that for many other companies. But look at this new survey from Bank of America noting a couple of things. First, 41% of those polled in the survey of fund managers want to see CEOs and CFOs strengthening their balance sheets.

That's up from 34% in the prior month. You break it down even further, 18% of those surveyed want to see a cutback in buybacks, which was interesting. So their month over month, fund managers want to see companies cut back on stock buybacks because of the volatility in the markets.

And then last but not least, 34% of those surveys want to see CEOs increase their capex. That is the lowest level since October of 2020, which is very interesting here. So you're having managers say, hey, look, you've seen a massive swing in your stock price. It's time to start-- get prepared, perhaps, for the next recession.

- And so with that in mind, I mean, clearly focusing in on the liquidity, having the money available to navigate, what that uncertain period would look like in the future.

BRIAN SOZZI: Well, balance sheets for-- for corporations are significantly improved relative to one, two, three, four years ago. A lot of these companies are sitting on tremendous amounts of cash-- even Walmart, for that matter-- that they could still invest, I would think, into a recession.

But look, now, I think these discussions are now starting to happen in a big way. After earning season, a lot of the banking executives-- and there I am. Maybe-- I think that's me at the head of the table demanding that CEOs pull back on their capex. That's very-- those are Warby Parker glasses.

- We should mention, by the way, all of this amidst the backdrop of-- in that Bank of America survey, investors are unusually bearish right now.

BRIAN SOZZI: Yeah.

- Is it the most bearish they've ever been? Is that what the survey said? [INAUDIBLE]

BRIAN SOZZI: Growth optimism is at its lowest level-- so below levels seen at the COVID recession in 2020, below levels of the dot-com crash, and below levels of the Great Recession. And I'm just reading the chart here.

- Yeah.

BRIAN SOZZI: This is what they were saying. But I want to note this, too. Outside of capex, you're seeing, I think, tech companies start to pull back on spending. Robinhood laying off workers. Coinbase-- who maybe we'll talk about a little bit later on in the show-- they came out with a letter overnight saying they're going to adjust their spending. So these are discussions happening in real time.

- And how does that change compensation for CEOs, too? I mean, [INAUDIBLE]

BRIAN SOZZI: It doesn't. They're still going to get paid. They're getting big checks, baby, big checks, big checks, big stock options.

- Well, [INAUDIBLE]

- They got to go out and buy deli meat, [INAUDIBLE]. Come on.

- Oh, yeah.

- Yeah, those stock options are not looking so-- as good as they did before.

BRIAN SOZZI: They all need their salami.

- Oh, goodness, Sozzi's Take here today. Stay focused, CEOs. That's the take.

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