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%

 

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