The kings of buyback

Many people seem to put a lot of emphasis on growth when buying stocks. I agree with them: growth is very important. But, to me, the management is more important than growth, because it usually assures more viability in the long run. That's why I've never bought ultra-growth companies like Amazon or Shopify. Charts can show I've been wrong because I could have doubled my portfolio over the last year if I had sold everything and just bought these two stocks. But I would have been much more anxious because they don't fit with my "well-managed stocks model".

When you begin, you don't have a clue on what makes a well-managed company. The answer is variable depending on the context. But, usually, if the debt level is low/medium, the executives buy back stock and the ROE is over 15 (ideally over 20), the chances that this company may be well managed are good. And a well-managed company may not surge overnight, but at least, it retains it's value, which is something you learn to appreciate over time.

Among these indicators of a well-managed stock, buybacks are usually great because they make you a bigger owner of the stock. For instance, if you own 10% of a company and the company buys back 50% of it's float, you're now the owner of 22,2% of the company. And you didn't do anything. Obviously, some times are better than others for a buyback. For instance, if the historical PE ratio of the shares has been around 15 and the company buys back it's stock at a PE of 25, you may be worried. But, for those who don't want to ask themselves too much questions, let's remember the fact that buybacks are usually good.

And here's some very great stocks in a buyback perspective. You can see the percentage of the float they bought back over the last 3 years:

Discover financial: 21%

O'Reilly Automotive: 19%

Apple: 15%

Dollarama: 14%

Carmax: 13%

Disney: 12%

Canadian Pacific: 11%

Credit Acceptance Corp: 10%

Home Depot: 10%

Buying back 10% of a multi-billion dollars company over a 3 years period is incredible. You have to be very disciplined and, mostly, dispose of a lot of money. So, there's two clues there: First, these companies make a lot of money, second, their managers want to offer you a bonified performance. 

  

...Then, you understand why Disney sell their fucking Magic Kingdom tickets for 115$ US. They want to screw costumers at the benefit of shareholders. 

So, I'm probably wrong VS the rest of the market, but I'll always be more amazed by a company that buys 10% of it's shares over a short period of time than about a company that grows it's sales by 20% over the same period. In a way, growth may be just an effect of fashion while buybacks are a great effort.