Introduction
This month’s Opportunity Report features a company that aggressively repurchases its own stock, having reduced its shares outstanding by approximately 60% since its IPO. We’ve found that researching companies that engage in (not just announce!) large share repurchase programs can be a great strategy for finding stocks that outperform the market over time. These companies are referred to as “cannibals” by Warren Buffett’s longtime sidekick and co-chairman of Berkshire Hathaway, Charlie Munger, whose second rule for beginner investors is “Look at the cannibals” (you may recall the first rule, “carefully study spinoffs” from our August Opportunity Report). A company that can consistently buy back a large number of shares over a long period demonstrates its ability to generate strong cash flow—after all, debt can only take you so far. This month’s featured company produces its strong cash flows thanks to its dominant market position, premium brand, and the ongoing trend toward automation in its industry.