Our Next Buy is a serious cannibal. This company has retired over 52% (!) of its shares since 2020! Let’s tell you why I think this Pabrai-style bet is so interesting. Why Cloning & Cannibals?Mohnish Pabrai has a simple secret: Cloning. He looks at what the smartest capital allocators are doing and clones their frameworks and high-conviction ideas. One of his favorite types of stocks to buy? Cannibals. A cannibal is a company that uses its cash flow to aggressively buy back its own stock.
Our Next Buy is a serious cannibal. It’s the market leader, with more than 60% market share. It pays a 2%+ dividend, but the Payout Ratio is below 15%. It uses the rest of its cash to buy back shares at low valuations By investing in this firm, you are benefiting from a management team that understands the power of compounding via share count reduction. Let’s look at the math:
When you combine a dominant market position with aggressive cannibalization at low valuations, you get a powerful compounding machine that flies under the radar of most retail investors. Honestly, I might have missed it too, but I found it by reading the 13-F filing of a professional investor that I respect. When I started researching the company, it became interesting very quickly. The company is trading at a low single-digit P/E ratio while management keeps buying back shares. Let’s find out which company I’m buying on Monday… Whenever you’re readyWhenever you’re ready, here’s how I can help you: ✍️ Three articles per week (Monday, Wednesday, and Saturday) One Dividend At A Time,-TJ Used sources
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