Global Buybacks #1

Hello friends,

As I said I go each week through all global buyback announcements (or all our script finds). I think about buybacks a bit differently. Buybacks are not good or bad. Buybacks are transfer of wealth from seller to the buyer, but I believe lots of companies buy back stock at a terrible point of time and their stocks hit lows few years later. Then suddenly implemented buybacks stop. We always overestimate how small % of companies and their management teams are good capital allocators. Nevertheles, sometimes you can find a company announcing buyback that is worth looking into further. So I would like to take this series to look for them, but also implement 2 minute rule of looking into each one and telling why I passed so revisiting is easier or looking more into interesting ones. This series is to look at all buyback announcement of companies under $300m every month.

You can use this for idea generation or just building watchlist. I am doing this every week and it really trains my first judgement about the companies. It must always look interesting at a first quick view. But sometimes I miss something hidden. So this journal will also help me to monitor my training, which I will periodically revisit. This is addition to my A-Z of every market. I need to turn everything. This time it is 72 stocks that announced buyback during the last few weeks.

How I think about buybacks

I think about buybacks as an accelerator and I think the car which is driven matters a lot. I like to look for asset light companies that do not need to retain lots of cash and decide to deploy it on buybacks when valuation is low. This is almost not the case in 99% of companies. I am always looking at business first and until then I do not care about buybacks. To me, the most attractive situation is when the business has long runway to grow and combining buybacks that transfer wealth from selling shareholders today to shareholders who decide to hold. I dont like buybacks when combined with nothing (no growth, melting ice cube, asset heavy business). I believe each dollar bought back should be able to grow for a long period of time and compound to see the real value of the initial dollar bought back. While investors might like to see buyback in any of the disliked cases, I believe the real power of buybacks is when great business can grow the value long into the future and not sacrificing its durability/business options by utilizing buybacks.

This is fantastic paper to read about buybacks.

Our script for some reason likes lots of asian stocks, but it pulls data from marketscreener.

1. Cematrix Corporation (CEMX.TO) - 10% buyback

   • Onsite production of cellular concrete for infrastructure, industrial, and commercial construction markets in North America. It offers cellular concrete products use in lightweight backfill for MSE walls, bridge approach fills, roadways and runways, and slope stabilization; insulation material for oil and gas facility slabs, roadways, shallow utilities, and contaminated site remediation; grout and flowable fill for tunnel grouting, annular pipe grout, pipe abandonment, and flowable fill applications. They work primarily as sub-contractor for major North American general contractors. $25.6m market cap and $20.6m EV. Lumpy sales and lumpy margins. Asset heavy business. Diluting a lot. But these business have lots of operating leverage. And they have won $9.7 million in new contract awards for tunnel grouting + forecasting record year in 2025. Increased infrastructure spending in Canada & U.S provides a strong tailwind. Insider ownership is 10%. They have multiple locations from coast to coast. Second half of the year is better. Scale matters a lot here. Larger projects have more competitors and lower margin. Apparently they are spcialty sub-contractor, which should lead to higher margins. Repaid all the debt. Had $20m in 2020 now they are net-cash. Interesting one.

   • I like this by the CEO: “We caution our retail shareholder base to not expect a new contract announcement each month. These new contracts are a strong start to the year and we look forward to announcing more contract wins in the future as they are awarded.”

2. Garda Property Group (GDF.AX) - 9.7% buyback

   • Garda Diversified Property Fund is a real estate investment trust externally managed by Garda Capital Group. It invests in real estate markets of Australia. I am not a big fan, but the company announced 10% buyback. They trade at discount to TBV, but this is almost always the case. The company pays 5.5% dividend on top of that. Their not left with much cash after interests payment. Selling properties to raise cash and buy new propetries. Seems hard to me.

3. Motorpoint Group Plc (MOTR.L) - 3.3% buyback

   • Motorpoint Group Plc operates as independent omnichannel vehicle retailer in the United Kingdom. It operates through Retail and Wholesale segments. Low margin, barely profitable. Could be good reversion to the mean play, but I am not a fan of that. Buyback is 2.7% so not significant. Sales are not growing the last 7 years. I am always on the lookout for network effects for such a company, but I dont see anything interesting here. Lots of inventories and short-term debt. Markdowns could occur if they would need to liquidate them fast. Pass.

4. Pamt Corp. (PAMT) - 2% buyback

   • Pamt Corp. operates as a truckload transportation and logistics company in the United States, Mexico, and Canada. The company provides truckload dry van carrier services that transports general commodities, such as automotive parts; expedited goods; consumer goods, such as general retail store merchandise; and manufactured goods, including heating and air conditioning units. It has $303m market cap and $509m entreprise value. The company announced 2% buyback. They make steady buybacks. Over the last 8 years, the share count has been reduced from 26m to 20m. While that is a good sign, profits collapsed under huge depreciation, which is due to significant CAPEX. But sales has not grown with that. Margins went down. Business seems very cyclical. They enjoyed good covid years, probably supported by huge demand given stimulus. But now it reversed again. It is asset heavy business which is not my kind of thing given the debt load.

5. SG Corporation (A004060) - 3% buyback

   • Fashion company, produces and sells woven garments primarily in South Korea. It offers formal dresses, casual wear, outer wear, and jackets. $47m market cap company announced 3% buyback. Over the last 7 years they deployed $30m on acquisitions, while sales declined from $270m to $90m. Quick pass.