r/valueinvesting
What companies could be the next autozone?
Author seeks the next AutoZone, praising its moat and massive buybacks while criticizing firms whose buybacks are offset by high SBC.
- Companies with stable moats and high FCF can generate massive long-term returns.
- True share buybacks significantly enhance shareholder value.
- Many companies' buybacks are ineffective as they merely offset high stock-based compensation dilution.
Autozone achieved a 100x by having a moat in car parts that is relatively unchanging, and buying back tons of shares, with over 90% retired. What company now, could do that, that has a ton of generated FCF and a steady stable underlying business with some sort of moat? I see a lot of companies doing buybacks but a lot of the time the share count doesn't drop much, as it just covers high SBC costs
It's something that's hated and left for dead right now, and probably sub 20 or 30b market cap.
Some historical examples of share cannibals are NVR, Ebay, Booking, Autonation, etc...
I'm gonna come out and say that Adobe and PayPal have a chance to do something similar (although I would definitely choose Adobe between the two, simply a business with more of a differentiated reason to exist). To be a long term share cannibal, you need to have a large portion of the market doubt you, otherwise you won't trade at a low multiple for long enough. You also need a management team that is able to swallow their pride enough to maintain a laser focus on buybacks, rather than boost their ego and try to buy their way into relevance at the cost of a diminished ROIC.
Adobe has a chance but I don’t think the most is as good as autozone. Autozone doesn’t need to worry about AI or high capex as car parts are staying the same
AutoZone had to worry about Amazon. I agree that their supply chain and parts availability is their moat, which was overlooked by Wall Street for 20 years.
But when you saw the lazy-eyed bald reaper named Bezos carving through one retail giant after another, it was a fair question to ask if they could figure out how to displace a car parts vendor.
Berkshire Hathaway is my vote for share cannibal over the next 10-20 years
Waste Management, Cintas, Rollins, Copart. Boring as hell, print cash, and nobody's disrupting them anytime soon.
AutoZone is the next Autozone.
O'Riley's, Casey's and Monster Energy. Just a long buy , reinvest dividends and hold.
Mmm, so I think it mainly achieved a 100x because it took 30 years. That's really the biggest factor.
The second factor is also the state of the market. Autozone first hit $30/share in 1996 and for 5-6 years after going nowhere. You want to buy in bear markets.
The third factor is size. You want to buy something very small today & see it grow into a mega cap decades from now. That's going to be hard to find also because of private markets.
I think the best thing to do is actually stay patient, keep cash, and accept conservative mid-single digits for sometime.
Or else go hunting in indonesian stocks for example where the conditions are ripe for 100x
Probably pretty unpopular but underrated answer, $HCA.
You read Cassandra too eh?
No, what about it?
Just spent 30\~min looking into HCA. I appreciate the comment! My concern would be that the government is going to continue to limit it's profitability in some way. Still seems to be priced at an attractive level and the stock buybacks make it a great comparison to Autozone.
Yeah, its a healthcare operator so it always carries that stroke of the pen risk.
Rollins and cintas
cycle gear. the only motorcycle retail gear retailer in America. (Comoto holdings, inc) private but watch for an ipo some day. Motorcycle ownership and riding feels like it is at an all time high, and everyone goes to these stores.
It’s private though
for now. Anything can happen. Value investing is long term. You don't know what mergers and acquisitions will bring.
Can’t order online?
They have both brick-and-mortar stores and dedicated online stores. They also manufacture the gear sold in both so they are very diversified.
TBBK and TNL are two for you to research.
TNL and TBBK would be a couple for you to research.
Visa. Ain’t going anywhere, only growing, takes a small bite out of a large percentage (and growing) of commercial exchanged.