One way to approach the challenge of picking stocks is to focus on the cannibals: those companies that regularly repurchase their own shares - year after year.
My suspicion is that companies that are able to reduce the number of shares outstanding consistently while still growing sales and earnings are quite likely to be doing many things right, and are also quite likely to have a good culture.
American Express is a cannibal and, not surprisingly, so are other Berkshire Hathaway owned companies. Perhaps most interesting to me about my most recent screen is the number of cheap Japanese companies. Ones like Nakano Refrigerator that seem to have started to repurchase their shares. It suggests that Japanese corporate culture might be changing.
Here is a spreadsheet
that I extracted from that screen
- which I ran on CapitalIQ. It looks for cannibals whose business is not shrinking and who have also reduced their share-count.
I think that it is a great starting point in the hunt for great investments.
As you know, I’m experimenting with this medium. Please email me with your comments on the spreadsheet.