Citi Research analysts Robert Buckland, Anna Esposito, Mert C Genc, Beata M Manthey, Jonathan Stubbs and Ayush Tambi take us through the mechanics of their Global Buyback Screen and the stocks that currently feature on the screen.
U.S. companies’ buybacks aggregate over $1T since 2009
In their Global Buyback alert dated October 22, 2013, the analysts point out that U.S. companies have taken advantage of the rock bottom interest rates for debt financing over the past few years to return capital to shareholders. They estimate that since 2009, U.S. companies have returned over $1 trillion to shareholders by way of buybacks. Furthermore, this trend will likely continue given the huge cash hoards visible on corporate balance sheets.
How Citi’s global buyback screener works
Citi screens global stocks in the universe of the MSCI AC World Index for candidates that have reduced their share count by 5% or more during the previous 12 months. The biggest 50 companies thrown up from this screening exercise, which is conducted monthly, make it to the final list.
In his book, The Dhandho Investor: The Low–Risk Value Method to High Returns, Mohnish Pabrai coined an investment approach known as "Heads I win; Tails I don't lose much." Q3 2021 hedge fund letters, conferences and more The principle behind this approach was relatively simple. Pabrai explained that he was only looking for securities with Read More
What if you had invested in these global buyback stocks?
You would have done very well. Citi’s global buyback screen has generated returns of 13.6% per annum over the last 13 years. Year to date it has appreciated 36%. Compare that to 19% achieved year to date by the MSCI AC World Index.
The current screen
The 50 companies that made it to the current list are shown below. It is interesting to note that 45 of these are U.S. companies, and that the most predominant sector in this list is Consumer Discretionary.
What if we compared this list with a list of Warren Buffet’s 15 biggest investment holdings through Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B)?
We find that four companies are common in the two lists:
General Motors Company (NYSE:GM)
Goldman Sachs Group Inc (NYSE:GS)
The Coca-Cola Company (NYSE:KO)
An investor seeking a value approach combined with a decent distribution yield could check out these stocks.