FCharlie

As if buying 20% of their shares in the past year wasn't awesome enough, GM should again be in the market very aggressively in the next quarter or two. No surprise because they have about $27 billion of cash on hand vs their $20 billion target and they just increased their FCF guidance yet again. Even with the stock at a new 52 week high, it still trades at 5X earnings An excerpt from today's conf call: Emmanuel Rosner Okay. That's great to hear. And then I guess as a follow-up, I think you reiterated your commitment to try and reduce share count to 1 billion shares in early 2025. You would probably need to reduce your share count by like 120 million shares over the next 3 months or so. Is that like a $5 billion buyback? Is that the sort of acceleration that you're targeting just over the next few months essentially? Obviously, would be significantly faster than what we've seen recently. Just generally speaking, is this the right math? And then how should we think about future pace of buybacks? Paul Jacobson Yes. So I will agree with your math that it's about 120 million shares to get there. And we've said that we believe that we can get there in early 2025. So no specific comments on when that is or what the velocity might be. But I think over the past year or so, I think we've demonstrated our commitment to returning capital to shareholders.

Shoutout to you for recommending this one. I own it because of you. This is what it looks like when a growth company tries to spend its entire market cap buying its own shares.

How about ULTA? P/E is 15 on 2024 earnings and 13.5 on 2025 earnings. Operating income has nearly doubled last five years. Operating margins have increased in the last five years from 12% to 15%. Revenue is growing every year with the one exception being 2020 when many stores were closed and people were staying home. Ex 2020 revenue grows consistently. ULTA has been buying $1 billion of stock back per year for a couple of years.

No idea what they will do with the money but I'm not sure diluting the shit out of shareholders is such a bad thing. I'm looking at the 10Q that came out today. The balance sheet equity was 1.307 billion and shares outstanding as of June 5th was 351 million. After doing the math for the 75 million shares sold for $2.1 billion cash and the 45 million shares sold for $930 million, balance sheet equity should now be $4.3 billion and shares outstanding about 426 million. Book value per share just nearly nearly tripled. The stock is still trading at a premium to book value so if you view this as just a melting ice cube the stock should drop by 50%-60%. But none of that matters if GME uses the new cash to make external investments because the APES will probably get excited and start buying calls on GME and also probably buy calls on whatever GME invested in which would just levitate the value of GME's investments. It's truly fascinating to watch this and it makes me really appreciate the fact that the stock market exists for all of us to enjoy. I mean, think of all the people out there who search the TV or scroll Twitter or Instagram looking for something to entertain them and we get this nonsense served right up on a silver platter to entertain us.

It would also be hilarious if GME authorized a new ATM and a share buyback at the same time and just played the volatility, totally willing to issue or repurchase shares depending on the madness of the market participants

I see 450 million shares traded since the 75 million ATM announcement. I'm not sure if they would have been legally allowed to start selling at 9:30am Friday but if they were I'd wager they are basically finished by now. The real question is, what will they do with $3 or $4 billion of cash and no debt? The stock has such a cult following that if the cash were used to make external investments it would probably spark another round of excitement and buying from the APE's. At a minimum, interest income will rise significantly and could overpower operating losses.

GM authorizing another $6 billion in buybacks after completing the $10 billion ASR and $1.4 billion of open market purchases this year. Still trading around 5X earnings. https://investor.gm.com/news-releases/news-release-details/gm-board-approves-new-6-billion-share-repurchase-authorization

Yep. The last ATM they completed in just days. I'm hoping they are hitting every bid in sight. The stock has already traded 131 million shares as of 11:15am EST and trading about a million shares every minute or two

Yes. But you have less ownership in a much larger equity base. This is how Tesla burned all the haters and shorts. They issued stupidly inflated stock to pay for their Giga factories. If GM or Ford needed to build a factory they had to earn money the old fashioned way, or borrow it and pay interest. Every share Tesla sold solidified their market cap. And every share GameStonk sells at $40 further solidifies the $40 valuation. If they issue 75 million more shares at $40 they will have $5 billion of cash and no debt. Interest income will be $250 mil/year.

Another 75 million share ATM!! How much cash does this company want? $5 billion? And ironically, the more shares they sell up here the more it solidifies the current elevated share price.

It seems to me like the gold price is being driven by Asian buyers, and the fact that the miners aren't following along is due to 1)American lack of interest and 2) Investors concern about the miners inability to control cost inflation. My suspicion is that eventually the miners will move much higher. I own several. But that said, I think there is another way to play this. I think because there is an extremely low probability that they decline much (since they haven't really risen much) they make for good short put opportunities., I have been short GOLD, AEM, PAAS, KGC puts all year, closing some out recently but letting the rest decay.

Yes GM has been a lousy investment for so long that a lot of people won't even consider it. But price has a way of changing sentiment. If GM continues to sit here generating $10 billion of FCF annually and keeps buying this aggressively their share the price is going to keep going higher. The ASR was a massive win. Let's just say out of the 1.4 billion GM shares that existed a year ago, let's just suppose 400 million of them were owned by index funds. Then here comes GM trying to buy 400 million of the billion that aren't owned by index funds. That's an insane amount of buying pressure for a stock that no one loves and no one respects. And because GM executed the overwhelming amount of those buybacks at about 4X earnings with free cash flow and cash on hand their eps estimates have soared, matching most of the price rise. The PE is now 5X. They can keep doing this just like AutoNation and the coal companies and the oil companies and everyone else who's gotten the memo that this is how you win when no one loves your stock

I think one by one these left for dead companies are figuring out that the playbook that is most likely to work for them in this investing environment is to pour all free cash flow into buybacks, or a combination of debt reduction and buybacks. The math doesn't lie, if you trade for less than 10X earnings then you are essentially priced for a zero growth future. But because you are trading for less than 10X earnings you can create enormous growth just buying your stock. GM is a perfect example. Their stock is up 50% since November, eps estimates get revised higher every month, but it still trades for less than 5X earnings. If people will never value it higher than 5X, they don't need to do anything but buy every share they can afford and investors will do phenomenally well.

AutoNation has repurchased about 4% of their shares YTD, if you annualize YTD they are on track for another year of buying about 12% of shares outstanding. Also they just authorized a new $1 billion buyback vs their $7 billion market cap. Stock nearing an all-time high and still trading at just 9X earnings. AutoNation has bought over half their shares in the last five years. https://investors.autonation.com/news-and-events/press-releases/press-release-details/2024/AutoNation-Reports-First-Quarter-2024-Results/default.aspx

GM has repurchased 17% of its shares since July (1.375 billion to 1.14 billion), largely through a $10 billion accelerated repurchase program. With that ASR now finalized, they continued buying in March through open market purchases. On the conference call the CEO mentioned they were on track to reduce shares outstanding to fewer than 1 billion, which would be a further 12% reduction. Interestingly, management said on the conference call that even though the stock price is up 50% since the ASR, the PE has only increased from 4 to 5. It's honestly remarkable that this stock trades at these levels when the buyback alone at 5X earnings has the potential to drive 15% annual eps growth.

I like Medtronic for dividends. You aren't reaching too hard for yield but you get over 3%. The stock isn't expensive, plus there's been 46 consecutive years of dividend increases

I thought this was an interesting interview on the subject of gold and gold miners

Thanks for mentioning this one. In 2015 their market cap was about $3 billion and they've spent $3 billion buying shares since that time. They've opened about 500 new locations in that time. They are a lot like AutoZone.

GM purchased 15% of their shares in December, with another 5-6% likely repurchased in Q1 as their ASR is settled. 2024 EPS estimates have risen from $6.76 to $9.00 since this buyback was announced, and the stock has risen 29%. Interestingly, the stock traded at about 4.5X earnings before and still trades at about 4.5X earnings. I don't follow this company closely, but let's say GM continues to generate $10 billion of free cash flow going forward, and continues buying stock at 4.5X earnings, how long until the stock rerates higher to say 7.5X earnings? And is 7.5X earnings appropriate if you are growing EPS by 15-20% annually? Why not 9X earnings? The potential returns get incredibly appealing in these types of situations, and these situations seem to be more and more common as the breadth of the market continues to diverge with many companies share prices left for dead. Total Number of Shares Purchased(a)(b) Weighted-Average Price Paid per Share(c) Total Number of Shares Purchased Under Announced Programs(b) Approximate Dollar Value of Shares That May Yet be Purchased Under Announced Programs(b) October 1, 2023 through October 31, 2023 25,399 $ 32.32 — $1.4 billion November 1, 2023 through November 30, 2023 — $ — — $11.4 billion December 1, 2023 through December 31, 2023 215,202,490 $ 31.60 215,189,872 $1.4 billion Total 215,227,889 $ 31.60 215,189,872

I don't recall AutoZone ever trading for 7X earnings at any point. 12-14X earnings yes. The thing about AutoZone is that they started deploying all free cash flow into buybacks in 1999 and they just never stopped. Like clockwork, every year shares decline 7%, 8% per year and the store count always grew. I don't expect it will ever trade below 12-14X earnings because they are too consistent. Their margins are too high. They sell something that you either need, or don't need. Imagine hearing on the radio that AutoZone has a sale 30% off starters. You think, but I don't need a starter. AutoZone knows you only need a part like that in the event of failure at which point you'll pay whatever price you have to. So they basically don't discount anything and their gross margins are over 50%. They grow eps every single year. I can't remember any year their eps declined. AutoNation has much lower margins, bogged down by new car margins which are historically not very high. Finance as well as parts & service make all the money. AutoNation historically trades around or just below 10X earnings so being at 7X currently they seem to be all too happy to deploy all free cash flow into buybacks. They, unlike AutoZone, will turn off the buyback if the price gets high enough. AutoNation also has the AutoNation USA division, which sells used cars. They only have 19 locations now, up from about 5 a few years ago. Carmax has hundreds of locations and trades at a much higher valuation so if all AutoNation ever did going forward was build a few hundred more used dealerships and keep shrinking their share count 10% per year, eventually rerating to KMXs multiple I'd be delighted. Also, both companies own lots of real estate which is comforting in the event that there ever was a true disruption to their industries.

AutoNation bought another 3% of shares in the quarter. 13% for the year. 65% of shares in the last decade. Still trades 6-7 P/E. It's honestly remarkable how skewed everything is and how many stocks trade at single digit multiples even as they are gobbling up shares as fast as they can. If active management ever comes back or if the MAG7 ever deflate, it could get really exciting for these companies that have hardly any shares left to divide by. https://investors.autonation.com/news-and-events/press-releases/press-release-details/2024/AutoNation-Reports-Fourth-Quarter-and-Full-Year-Results/default.aspx

A lot of public libraries have printed copies available. I've spent countless hours looking at it and making copies of pages when I stumbled across something interesting.

Welcome to the APA club. I've been riding this one up and down and ultimately nowhere for a couple of years now with nothing to show for it but dividends and a few puts that I sold that expired. I too think it's seriously undervalued, yes for Suriname, but also for the LNG contract with Cheniere that at one point would have been worth $1.5 billion annually on its own but today is more like $0.5 billion. Every time APA gets up in the mid $40s I think it's going to break out yet every time it has just round tripped back down to these levels. I think you will do well with this entry point. One thing that has been frustrating to me is that APA has a habit of pausing their buyback quite often for news that hasn't been disclosed, hopefully they can buy back a solid amount of shares going forward because the valuation is really low.

Another 1.3 million AutoNation shares repurchased in Q3. Only 42.8 million to go https://investors.autonation.com/news-and-events/press-releases/press-release-details/2023/AutoNation-Reports-Third-Quarter-2023-Results/default.aspx Capital Allocation, Liquidity and Leverage During the quarter, cash from operating activities totaled $256 million, capital expenditures were $87 million, and AutoNation repurchased 1.3 million shares of common stock for an aggregate purchase price of $200 million. As of October 25, 2023, AutoNation has approximately $439 million remaining under its current Board authorization for share repurchase. The Company has approximately 43 million shares outstanding, which represents a 10% decrease year-to-date and a 49% decrease from the 83 million shares outstanding at the end of 2020.

Shittybank June 30, 2015: 3,009,845,273 shares outstanding. Stonk Price $55.24 Market Cap $166 billion Sept 19, 2023: 1,925,702,484 shares outstanding. Stonk Price $42.68 Market Cap $82 billion Shares down by 36% Market Cap down by 51% I think Shittybank has the ingredients to be one of the best performing cannibals over the next one to two decades. It's universally unloved. No one has high expectations for it, yet they will probably spend their entire market cap on buybacks by the end of the decade.