A quant scan for good capital allocators
Over the past few weeks I've been doing some in-depth due diligence on a potential investment that operates in the advertising industry. A key focus of my DD process is the sustainability of customers and their associated annual spend - recurring revenues from loyal, sticky customers are high on my priority list. A quick way to check the durability of a firm’s revenues is to take a look at how they performed during the most recent recession - in this case, the 2008 Global Financial Crisis. While the company I'm looking at performed "ok" throughout this period, one thing I did notice was the exceptional performance of two peers - WPP & Omnicom. Not only did both firms manage to maintain/grow revenues throughout the period, they aggressively repurchased shares as their stock prices collapsed, generating substantial shareholder value in the following years. This is a sign of a tremendous capital allocation decision, because, companies on average tend to destroy value through share buybacks. Making aggressive purchases at market peaks, when multiples are high, and sitting on piles of cash when Mr Market offers bargain prices for their stock.
This got me thinking, wouldn't it be interesting to go through a list of companies that reduced their share base throughout the 2007 - 2009 period? While it may not necessarily signify superior capital allocation skill for each firm in the list, surely it would throw up a few interesting ideas. At the very least, it should highlight companies that remained prosperous throughout the worst economic downturn since the Great Depression.
Criteria
Limit universe to Western Europe & the UK (this is my area of focus)
Exclude companies with a current market cap >US$1bn (this is my area of focus)
Exclude companies with current insider ownership < 2.5%
Exclude companies who weren't listed as at 1/01/2007
Results
The above criteria generated a list of 1,087 securities. I then wanted to sort the results to find good capital allocators. I defined this for simplicity as those companies which reduced the number of shares outstanding over the period from FY07 to FY09. Three hundred and twenty two companies passed as good capital allocators under this crude definition. This percentage, roughly a third of the total population, surprised me because, in my experience, good capital allocators are few and far between. The number could probably be reduced by excluding financials which may have had some funny business going on with their capital structure over the period, but nevertheless, it's still a large number.
Now the fun part begins - going through each firm, one by one.
"The person that turns over the most rocks wins the game" - Peter Lynch.
Shares on issue Code Market cap ($USD) 2007 2009 Change SWX:BPDG 66.13 103.12 14.33 -86.1% CPSE:MNBA 38.04 5.98 1.15 -80.8% CPSE:TOTA 30.91 6.82 1.35 -80.3% OM:BURE 826.43 107.78 53.29 -50.6% LSE:OIG 132.13 41.28 24.32 -41.1% WSE:PPS 34.96 114.17 83.00 -27.3% SWX:SAHN 210.60 0.82 0.61 -26.0% LSE:NAS 490.13 19.98 14.79 -26.0% CPSE:MIGA B 18.54 0.60 0.45 -24.8% ENXTAM:BEVER 79.83 22.50 17.44 -22.5% ENXTPA:KAZI 145.25 24.41 19.29 -21.0% ENXTPA:AUB 463.34 17.19 13.83 -19.6% LSE:WPC 261.30 81.70 67.00 -18.0% ENXTPA:AURE 102.42 13.79 11.39 -17.5% BME:BDL 530.37 7.14 5.91 -17.3% SWX:ALPN 179.31 15.86 13.29 -16.3% ENXTPA:MLPAC 1.33 0.62 0.52 -15.4% LSE:MCGN 352.14 80.44 69.02 -14.2% OB:TOTG 90.41 7.12 6.12 -14.0% ENXTPA:MED 21.23 16.07 13.83 -14.0% AIM:CCT 126.65 46.71 40.21 -13.9% BME:TRG 218.27 204.93 176.50 -13.9% DB:BFV 223.87 16.81 14.80 -12.0% LSE:ATS 150.84 36.07 31.77 -11.9% ENXTPA:FLE 241.78 4.79 4.22 -11.9% ENXTPA:UDIS 73.34 21.45 18.98 -11.5% ENXTPA:SX 140.23 6.88 6.09 -11.4% ENXTPA:OPN 261.10 10.88 9.65 -11.3% CPSE:SCD 46.24 5.63 5.02 -10.8% XTRA:UUU 31.65 49.36 44.03 -10.8% OM:ORES 775.66 129.55 115.56 -10.8% SWX:CLTN 432.38 4.63 4.15 -10.4% ENXTPA:IGE 156.92 1.75 1.58 -10.0% SWX:ZUBN 84.75 2.40 2.16 -9.9% ENXTPA:ALMIL 189.82 3.46 3.12 -9.9% OM:PRIC B 128.95 115.33 104.08 -9.8% LSE:STHR 513.83 135.70 122.50 -9.7% OB:PROTCT 822.54 96.62 87.27 -9.7% ENXTPA:SABE 87.73 4.18 3.78 -9.5% ENXTPA:EMG 28.95 2.63 2.39 -9.4% XTRA:TIM 237.58 8.52 7.73 -9.3% ENXTPA:HF 37.52 4.14 3.76 -9.1% WSE:SKA 237.33 15.08 13.72 -9.1% AIM:MLIN 37.77 20.85 18.97 -9.0% ENXTPA:PVL 568.98 21.90 19.99 -8.7% DB:UMS 2.10 6.22 5.68 -8.7% ENXTPA:ALCES 1.35 8.99 8.21 -8.6% XTRA:APM 64.32 23.36 21.35 -8.6% ENXTBR:SOFT 16.37 7.32 6.70 -8.6% ENXTPA:VI 20.97 3.41 3.13 -8.3% OM:UFLX B 41.71 18.45 16.94 -8.2% ENXTPA:EXPL 207.39 0.20 0.18 -8.1% DB:DBAN 759.92 14.88 13.68 -8.1% ENXTAM:DOCD 4.65 7.22 6.64 -8.1% LSE:CLIG 130.31 27.82 25.59 -8.0% ZGSE:HUPZ 204.67 0.51 0.47 -7.7% XTRA:SYT 101.28 5.55 5.12 -7.7% OM:POOL B 31.01 18.47 17.12 -7.3% ENXTPA:CIB 10.04 99.15 92.00 -7.2% DB:GWI1 584.10 45.91 42.66 -7.1% ATSE:EXAE 376.51 70.27 65.37 -7.0% ENXTLS:ORE 9.63 13.56 12.62 -6.9% LSE:CAU 101.28 151.30 141.10 -6.7% ENXTPA:LIN 401.50 11.89 11.10 -6.6% DB:AJ91 54.32 5.70 5.34 -6.4% ENXTBR:REC 426.52 30.88 28.93 -6.3% AIM:WINE 295.89 65.60 61.58 -6.1% ENXTPA:PSAT 26.82 4.20 3.94 -6.1% ZGSE:ATPL 94.52 1.40 1.31 -6.1% LSE:LIO 310.11 31.84 29.94 -6.0% OM:LAGR B 699.83 71.03 66.86 -5.9% ZGSE:MDKA 69.26 0.03 0.03 -5.9% XTRA:IS7 31.66 4.29 4.04 -5.8% ATSE:ILYDA 2.63 9.00 8.49 -5.7% SWX:JFN 672.19 5.77 5.44 -5.7% XSAT:HQ 60.92 29.17 27.52 -5.6% OB:COV 54.19 8.30 7.84 -5.6% ENXTPA:ALGIL 857.22 19.60 18.50 -5.6% CPSE:BORD B 41.43 0.34 0.32 -5.6% ENXTPA:GUI 32.39 15.57 14.71 -5.5% WSE:RPC 42.21 4.61 4.36 -5.4% XTRA:ACX 825.19 7.42 7.02 -5.4% SWX:ALTN 40.02 4.88 4.63 -5.2% ENXTPA:MUN 42.98 31.27 29.66 -5.1% CPSE:ADMCAP B 35.17 287.50 272.80 -5.1% CPSE:PARKEN 143.00 2.49 2.37 -5.1% DB:ADC 68.23 14.51 13.78 -5.0% ENXTPA:SII 522.97 21.00 19.98 -4.9% LSE:LMS 57.64 286.43 272.64 -4.8% OM:IAR B 272.35 11.60 11.05 -4.7% ENXTPA:LACR 96.09 3.74 3.57 -4.7% OM:ENEA 160.00 18.33 17.48 -4.6% OB:ITE 72.74 87.43 83.40 -4.6% ATSE:KYLO 50.70 16.62 15.88 -4.5% ENXTPA:ESI 293.85 5.70 5.45 -4.3% ENXTPA:LBON 266.17 1.21 1.16 -4.3% CPSE:DLH 16.46 18.44 17.65 -4.3% AIM:NAR 11.41 30.46 29.17 -4.2% SWX:PEHN 218.89 4.05 3.88 -4.1% ENXTPA:VIL 499.70 70.12 67.24 -4.1% LSE:IIT 411.76 66.13 63.43 -4.1% LSE:SEC 196.09 72.63 69.68 -4.1% BME:AZK 218.40 25.19 24.17 -4.1% OB:BOR 23.31 2.05 1.97 -3.9% XTRA:HNL 226.75 5.40 5.19 -3.9% ENXTPA:SFT 30.02 3.07 2.96 -3.9% CPSE:NORTHM 85.05 20.90 20.10 -3.8% DB:ERO1 10.51 42.06 40.46 -3.8% LSE:TOWN 210.73 55.16 53.06 -3.8% ENXTPA:PARRO 406.34 13.65 13.14 -3.7% ATSE:BIOT 1.47 17.35 16.73 -3.6% ENXTPA:ALACI 47.16 6.00 5.79 -3.5% OM:ACAN B 353.58 79.80 76.97 -3.5% LSE:RWA 474.36 79.85 77.05 -3.5% ENXTPA:GPE 124.73 4.00 3.86 -3.5% SWX:NBEN 98.33 5.66 5.47 -3.4% WBAG:WPB 61.09 4.59 4.43 -3.4% XTRA:B8A 369.63 6.62 6.39 -3.3% XTRA:AEI 235.68 8.97 8.67 -3.3% OB:NOD 815.09 174.70 168.94 -3.3% ENXTPA:SDT 13.89 4.34 4.20 -3.2% ENXTPA:PCA 287.65 13.55 13.13 -3.1% ENXTPA:NRO 780.41 24.21 23.46 -3.1% CPSE:SANI 168.56 1.91 1.85 -3.1% HLSE:HONBS 18.41 3.66 3.55 -3.0% ENXTBR:SMAR 70.68 36.49 35.41 -2.9% SWX:DCN 133.94 0.16 0.16 -2.9% OM:VIT B 297.89 19.58 19.02 -2.9% XTRA:NC5A 79.48 2.05 2.00 -2.8% LSE:BUT 399.84 48.01 46.68 -2.8% SWX:SHLTN 78.22 10.81 10.52 -2.7% LSE:QRT 33.53 20.24 19.68 -2.7% OM:TRAC B 353.49 16.51 16.07 -2.7% ENXTAM:KA 167.98 15.07 14.68 -2.6% BUSE:ANY 75.81 14.76 14.37 -2.6% DB:BIJ 546.10 8.10 7.89 -2.6% XTRA:LSX 39.10 5.34 5.20 -2.6% XTRA:OSP2 324.29 10.28 10.02 -2.5% ZGSE:ADPL 111.45 4.17 4.07 -2.5% BME:LGT 199.58 10.97 10.70 -2.5% ENXTPA:INFE 106.75 1.19 1.16 -2.5% ISE:DQ7 71.38 10.47 10.21 -2.4% WSE:DGA 1.36 1.27 1.24 -2.4% DB:TUR 51.12 3.72 3.63 -2.4% ENXTLS:CFN 49.22 127.08 124.13 -2.3% SWX:TOHN 111.03 14.88 14.54 -2.3% OB:MEDI 171.13 18.84 18.41 -2.3% XTRA:VBK 789.07 62.96 61.53 -2.3% ATSE:ELTRK 37.17 14.46 14.13 -2.3% ENXTLS:LIT 0.44 0.50 0.49 -2.2% LSE:PHTM 794.44 367.88 359.72 -2.2% ENXTPA:ITL 29.06 1.78 1.74 -2.2% OM:NEWA B 449.55 68.84 67.34 -2.2% WBAG:BWT 421.99 17.83 17.45 -2.1% CPSE:HARB B 84.79 5.95 5.83 -2.1% ENXTAM:NEWAY 175.56 10.14 9.93 -2.0% SWX:VET 854.04 0.43 0.42 -2.0% CPSE:NTR B 14.97 1.89 1.85 -2.0% CPSE:SOLAR B 427.87 6.96 6.83 -2.0%