Public Company Share Repurchase-Cannibals

[FCharlie]

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.

 

 

[Monsieur_dee]

Haven't seen these two companies mentioned in this thread . Both in the Berkshire 13F

[schin]

On 9/20/2023 at 2:04 PM, Spekulatius said:

I have not listened to Chitchat  AZO podcast, but you likely get better info here (Acquired Podcast):

https://podcasts.apple.com/be/podcast/autozone-exemplary-capital-allocation/id1559120677?i=1000542928430

 

@Spekulatius - In terms of DFS and its space, would you consider DFS' cannibal nature (i.e. above average capital allocation skills) be trumps over possibly better business models (that don't have student loans) like COF, Visa, MA?

 

I do not believe they purchased as many shares at DFS, but do they have a big moat/business?

 

[Warner]

Imperial oil in Canada has gone from 850K to 555K outstanding in 6 years...

They have no significant growth projects being funded in the near/medium term so this will continue the oil price holds up meaningfully.

[Spekulatius]

8 hours ago, schin said:

 

@Spekulatius - In terms of DFS and its space, would you consider DFS' cannibal nature (i.e. above average capital allocation skills) be trumps over possibly better business models (that don't have student loans) like COF, Visa, MA?

 

I do not believe they purchased as many shares at DFS, but do they have a big moat/business?

 

V and MA are an entirely different business model, so it's not comparable to DFS.

 

I think DFS has a better business model than COF with their branches, auto lending and commercial lending. I think they do a pretty good job in credit cards but not so much in the other two business which consume considerable resources.

 

That said, I don't like DFS student loan business which they acquired in 2010. it's a diversion from DFS core credit card business and I hope they get rid of it:

https://www.pymnts.com/acquisitions/2023/report-discover-financial-services-weighs-sale-of-student-loan-business/

[influx]

On 10/28/2023 at 1:51 AM, Monsieur_dee said:

Haven't seen these two companies mentioned in this thread . Both in the Berkshire 13F

 

 

Yes, @Monsieur_dee

Bob Robotti was talking about LPX. I watched a fireside chat a month or two ago.

Is there a screen or a way to track these cannibals on quarterly or annual basis? It maybe manual or using ycharts and similar platforms?

Edited December 16, 2023 by influx

[influx]

On 9/21/2023 at 4:04 AM, Spekulatius said:

I have not listened to Chitchat  AZO podcast, but you likely get better info here (Acquired Podcast):

https://podcasts.apple.com/be/podcast/autozone-exemplary-capital-allocation/id1559120677?i=1000542928430

 

@Spekulatius how about BHF?

[Spekulatius]

On 12/16/2023 at 1:38 PM, influx said:

 

@Spekulatius how about BHF?

I prefer JXN in that space, owned it two times but are currently out. Both BHF and JXN are black boxes in terms of accounting, but generate a lot of cash that’s used for buybacks and dividends in JXN case. They tend to sell off when financial markets get stressed.

 

Another on in th energy space I recently found is IMO (oil sands business from Exxon). They reduced shares from ~850M shares in 2016 to 540M shares now (after the latest issuer bid).

 

Edited December 23, 2023 by Spekulatius

[influx]

On 12/17/2023 at 12:29 AM, Spekulatius said:

I prefer JXN in that space, owned it two times but ate currently out. Both BHF and JXN are black boxes in terms of accounting, but generate a lot of cash that’s used for buybacks and dividends in JXN case. They tend to sell off when financial markets get stressed.

 

Another on in th energy space I recently found is IMO (oil sands business from Exxon). They reduced shares from ~850M shares in 2016 to 540M shares now (after the latest issuer bid).

 

 

Yeah, okay. Thank you.

[bargainman]

Anyone looked at the Morningstar buyback etf?  Looks like more of a dividend etf now but I wonder if the buyback strategy is still working these days...

[Sweet]

10 hours ago, bargainman said:

Anyone looked at the Morningstar buyback etf?  Looks like more of a dividend etf now but I wonder if the buyback strategy is still working these days...

What’s the ticker?  Are you talking about PKW?

[Xerxes]

15 hours ago, bargainman said:

Anyone looked at the Morningstar buyback etf?  Looks like more of a dividend etf now but I wonder if the buyback strategy is still working these days...

I may be wrong but I think Morningstar itself (the company) is a capital return story 

[Gregmal]

eBay 

[KPO]

1 hour ago, Gregmal said:

eBay 

This was on my list as well. Almost 45% since the beginning of 2019. Not bad. 

[Eldad]

On 9/19/2023 at 9:56 PM, Xerxes said:

For those interested, the ChitChat Podcast run 3 episodes in late summer looking at three cannibals. 
 

AutoZone

Lowe’s

Discover Financial. 

I was going to say LOW. 842 M to 577 M in past 5 years. 7.8% or so yearly. 
 

Like AZO, it is never extremely overvalued and can therefore chug away constantly. I think it is a better business than AZO as well. 

[KPO]

26 minutes ago, Eldad said:

I was going to say LOW. 842 M to 577 M in past 5 years. 7.8% or so yearly. 
 

Like AZO, it is never extremely overvalued and can therefore chug away constantly. I think it is a better business than AZO as well. 

It looks like Lowe’s buyback is mostly debt financed as their debt has more than doubled to -$36B in the last four years.  That said, the other Loews decreased their share count by about a third and paid down a third of their debt over the same period. 

[Eldad]

12 minutes ago, KPO said:

It looks like Lowe’s buyback is mostly debt financed as their debt has more than doubled to -$36B in the last four years.  That said, the other Loews decreased their share count by about a third and paid down a third of their debt over the same period. 

That is true on the debt. 5 y average ROE of 165% vs 4% I will still take the hardware store version. 

[Spekulatius]

IMO (Imperial oil, Exxon subsidy) is not much talked about , but they have reduced their sharecount from 850M shares in 2018 to ~560M shares after the last issuer bid. All this without much debt and while increasing production.

[schin]

1 hour ago, Spekulatius said:

IMO (Imperial oil, Exxon subsidy) is not much talked about , but they have reduced their sharecount from 850M shares in 2018 to ~560M shares after the last issuer bid. All this without much debt and while increasing production.

 

With cannibals, do you believe the share count will go down so low, and Exxon already a majority shareholder will just buy it outright?

[schin]

4 hours ago, KPO said:

This was on my list as well. Almost 45% since the beginning of 2019. Not bad. 

 

I always like $EBAY, but it would be worth so much more if it kept $PYPL.  In one sense, good capital allocate relative to share buyback... bad allocation on divestment... 

 

It is cheap though.

[Spekulatius]

3 hours ago, schin said:

 

With cannibals, do you believe the share count will go down so low, and Exxon already a majority shareholder will just buy it outright?

Exxon sells their shares pro rata in their issuer bids and keeps their stake at ~70%. Seems like they have no intention of buying this outright.

[bargainman]

On 12/28/2023 at 6:50 AM, Sweet said:

What’s the ticker?  Are you talking about PKW?

 

Yes PKW

[dwy000]

21 hours ago, KPO said:

It looks like Lowe’s buyback is mostly debt financed as their debt has more than doubled to -$36B in the last four years.  That said, the other Loews decreased their share count by about a third and paid down a third of their debt over the same period. 

Oracle is similar.  From 2011 to 2022 they retired almost half their shares (5.15b shares OS down to 2.7b shares).  Over the same period LTD went from $13.5bn to $86.4bn (although that includes buying Cerner for $30bn and NetSuite for $9bn).

[kab60]

On 12/29/2023 at 4:02 AM, schin said:

 

I always like $EBAY, but it would be worth so much more if it kept $PYPL.  In one sense, good capital allocate relative to share buyback... bad allocation on divestment... 

 

It is cheap though.

Ebay spun off Paypal, so the above doesn't make much sense unless you think there were special synergies at work here. EBAY shareholders got to participate in Paypal following the spin-off, which if anything unlocked value as they were valued differently and could optimize incentives and capital allocation (and cater to different shareholders).

 

I also don't think Ebay has been particularly good at doing buybacks. They did most of their buybacks in the post-covid period where shares briefly touched $80. So while they've spent a lot of money on buybacks, they don't exactly seem to have timed them well.

 

I'll throw Arrow Electronics in the pot. It's mostly a semiconductor distribution business. Does like 1B of net income on 3B in tangible equity. It's cyclical but as a distributor has counter-cyclical cashflows, so it's one tough cockroach to kill. It's a simple business, one Buffett likes (owns TTI and Mouser), and the industry is well-consolidated so basically just bolt-on deals+buybacks left for Arrow to do.

 

 

Edited January 8 by kab60

[Eldad]

AMAT ramps up when it counts. 
 

Share price dipped way below Morningstar FV in 2015, 2018, 2022. 5.81%, 16.54%, & 7.18% buyback yields in those years. 1-4% otherwise.