This Week's Stock DEEP DIVE

Welcome to the VIP edition newsletter from ALPHA, our Stock Deep Dive! It’s time to get in the zone… 👀 

Stock Deep Dive: Autozone (AZO-US, $45B MCAP)

Warren Buffett loves cannibal stocks.

These stocks are so active on buybacks that they lower their outstanding shares and boost long-term return profiles for shareholders.

But there’s a lot more behind the scenes that has to go on to enable a company to pursue this incredible strategy. They have to have a solid business foundation that is profitable over long periods of time to have the cash available to do so.

This week’s pick is a value play that is an excellent capital allocator for preserving market positioning, growing revenue steadily, and having a metronomic free cash flow profile that allows them to return capital to shareholders.

In last week’s version of the Alpha Newsletter, we talked about the concept of buybacks, highlighting how Apple has used this strategy to enhance shareholder return, but this week’s deep dive is on a company that is buying back an even higher percentage of their own shares.

So, without further ado, let’s get to this week’s “Out of the limelight” pick: Autozone.

• Buyback King 👉 RIP Shares Outstanding

• Overview 👉 What Does Autozone Do?

• How Do They Win? 👉 Value Proposition

• How Do They Make Money? 👉 Multichannel Model

• Key Relationships 👉 Diversified Network of Suppliers and Buyers

• By The Numbers 👉 Key Metrics

• Risks 👉 Potential Pitfalls

Buyback King 👉 RIP Shares Outstanding

Before we get into the company's details, I want to show you something I found truly outstanding (pun intended). After looking at Apple’s shares' outstanding vs. stock price performance charts, I thought, “OK - who else is doing this?” It wasn’t long before I came across this remarkable chart from Koyfin:

Since 2014, AZO has lowered its shares outstanding by 48%. There are only four companies with more aggressive buyback profiles than Apple, and Autozone is the king of the castle.

While some startup decks will show you that “hockey stick” revenue growth chart when they forecast the future, Autozone has pulled off a reverse hockey-stick profile regarding outstanding shares.

So why does this matter? Share buybacks reduce the number of shares outstanding, which has several benefits:

Subscribe to Premium to read the rest.