The New 2018–2019 Uber Cannibals

3/29/2018

In late December 2016, I co-wrote an article on Forbes.com that introduced the "Uber Cannibals," a five-stock investing strategy that invests in businesses aggressively buying back their own stock. This is a "set it and forget it for one year" strategy that rebalances every April when 5 companies are selected for the portfolio for the upcoming year.

The Uber Cannibals draft season is now upon us, and it's time to pick our 2018 - 2019 team.

As a recap, in my 3/31/17 blog post, we met Ms. Sonia Patel, who had embarked on her Uber Cannibals investing journey with $100,000 from her IRA account at Interactive Brokers. Sonia invested in the first 5 Uber Cannibals on 1/3/17, and then rebalanced her portfolio in April 2017 with the 2017 - 2018 Uber Cannibals, which were:

Lowe's (LOW)
NVR (NVR)
The Hackett Group (HCKT)
Select Comfort (SCSS)
Willis Lease Finance (WLFC)

As of 3/29/18, Sonia's $100k was worth $130,646 (after trading costs), up 30.6%. If Sonia had instead invested in the S&P 500 over that period, she would be up 20.9% and her portfolio would be worth approx. $10k less, or $120,907.

	Last 12 Months	Since 1/3/17	Value of $100K invested on 1/3/17
Uber Cannibals	22.1%	30.6%	$130,646
S&P 500	14.0%	20.9%	$120,907
Small Dogs of the Dow	2.7%	7.5%	$107,484

Lowe's and Hackett Group paid dividends totaling $744. Per our rules, Sonia reinvested those dividends back into the same businesses.

The Ubers are doing quite well! This strategy makes sense if you intend to follow it for at least a decade or two (or longer). So we shouldn't fixate too much on short term performance. But I am happy to see that Sonia is off to a great start. Keep at it Sonia!

The New Uber Cannibals:

For 2018 - 2019, our algorithms selected the following five Uber Cannibals:

Sleep Number Corp. (SNBR)
Corning Inc. (GLW)
PulteGroup (PHM)
Discover Financial Services (DFS)
Lear Corp. (LEA)

Sleep Number Corp. (which recently changed its name from Select Comfort) will continue to be in the portfolio for another year. But we have four new kids on the block.

If you invested in the Uber Cannibals in April 2017, then leave Sleep Number Corp untouched, and sell Lowe's, NVR, Hackett, and Willis Lease. Then invest the proceeds equally among the four new kids: Corning, PulteGroup, Discover Financial Services, and Lear.

Below is the 1 year return of the 2017-2018 Uber Cannibals through 3/29/18:

Company	1 year return
Lowe's Companies	6.7%
NVR	32.9%
The Hackett Group	-17.6%
Sleep Number Corp	41.8%
Willis Lease Finance	53.4%

If you invested in the Uber Cannibals in April 2017 in a taxable account, try to sell the winners (currently Lowe's, NVR and Willis Lease) after holding them for at least 366 days and the losers (Hackett) after no more than 364 days.

If you are a new investor to the Uber Cannibals, you can just equal weight the five stocks (i.e., invest the same amount of money in each of these five) and keep that portfolio until April 2019, when I'll provide the 2019 - 2020 portfolio on www.ChaiWithPabrai.com. Happy Cannibal Investing!

Note, anyone who invests in any strategy needs to do their own research/due diligence and are themselves fully responsible for the outcome.

19 Comments

vishal

3/29/2018 08:54:23 pm

Thanks for this yr's update...
How can we use similar approach for indian stks...
thanks.

Qais Ur Rehman Rasooli

3/30/2018 06:54:55 am

Thank you Mr.Pabrai, While screen these stock what else do you look at except share buy-backs?

Great Respect Dear Sir.

JIGARKUMAR SARAIYA

3/30/2018 07:39:46 am

Thank you !!

Mungeri Lal

3/30/2018 07:11:06 pm

Dear mohnish

Thank you very much once again.

You've chosen some great businesses in india.

Thanks for believing india story

Rahul link

3/30/2018 07:32:04 pm

Thanks a lot for the update. I was wondering how you think about macro vs. micro.

For example, if we are in an overheated environment, would you still advise investing in these strategies.

Thanks

Asaf Polturak link

3/30/2018 09:27:18 pm

I was surprised to read this post. This is basically a quant strategy, but it left me wonder why did you choose to select this one over a myriad of others. Obviously you are not about quant investing...
Would love if you can address this on your next talk!

Asaf Polturak

3/30/2018 09:35:58 pm

Never mind. I read the Forbes article and got it.

Ben

3/31/2018 09:08:04 am

PHM shows nothing but insider selling for years. Where are you finding your data?
http://insidercow.com

Rob

6/7/2018 11:42:48 am

Ben, he's talking about the company buying back it's stock, not what executives or insiders are doing. Stock buybacks done at the corporate level.

Hemal link

3/31/2018 09:21:21 am

Great information! Thank you for sharing Mohnish.

Chetan

4/1/2018 07:46:36 am

Helllo Mr Pabrai:

First off, thanks for making these available to the general public. I have 2 questions.

1. In you forbes article, you mention having cheapness and goodness filters. could you please shed some light on those.

2. How different are the results compared to sorting by shareholder yield (using FCF and dividends in addition to buybacks).

thanks again!

Anonymous

7/28/2018 12:42:23 am

I worked for The Hackett Group for a little under four years and can tell you that their senior management is notoriously cheap when it comes to pay raises and insistent on consultants at all levels making their quarterly billing targets, pretty much without regard to what’s good for their clients or the company’s long-term strength and health. You can read quite a few reviews on Glassdoor about how upper management is all about maximizing their own comp at the expense of employees, that many of them are nearing retirement age and have one foot out the door, etc. I honestly doubt the CEO knows much about the core EPM, BI and Finance Transformation offerings that his firm provides—he is mostly a slick salesman type who smiles and speaks about a lot of vacuous generalities including “market leadership” and “innovation”.

Just goes to show that whatever the numbers might show, it pays to do some scuttlebutt (per Phil Fisher), and that what Warren Buffett called “the nine most important words ever written about investing”, Ben Graham’s pithy but powerful phrase that, “investing is most intelligent when it is most businesslike” is truer than ever in this Amazonian age of taking a very long-term view and being extremely customer-focused.

I would much rather own (and I do) a company like Accenture which, while not perfect, at least rewards its performers well, cares about career development and corporate culture, isn’t overly insistent at meeting quarterly targets at the expense of investing in the business, and whose senior management are pretty much all people who have grown up with the company and been successful consultants themselves and who keep closer to the details of their customer offerings and operations beyond just billings. Accenture has a great track record of rewarding patient shareholders, a much better demographic and economic tailwind story than Hackett, and would make a much better multi-decade investment than Hackett almost regardless of price. I know this Uber Cannibals is meant to be annual, but perhaps in some cases the timeframe actually works against its purpose.

4/26/2021 05:32:46 am

Update
3/29/18 - 3/29/29 3-year return:
ACN: +82.91%
S&P500: +50.50%
HCKT: +0.56%

4/26/2021 05:33:26 am

Sorry, end date meant as 3/29/21 of course.

IPD

7/30/2018 09:38:18 am

Here you can see a great way to invest your money and become millionaire: https://bit.ly/2M28Ee8

Ted

9/20/2018 08:19:30 am

I'd be curious to see this list produced every 6 months though I realize that it might be less advantageous from a tax standpoint. Thanks for sharing.

gelo link

11/5/2018 09:50:15 am

TORONTO, Aug. 7, 2018 /CNW/ - Anaconda Mining Inc. ("Anaconda" or the "Company") (TSX: ANX) (OTCQX: ANXGF) is pleased to announce that, on August 1, 2018, it registered its 100%-owned Goldboro Gold Project ("Goldboro", or the "Project") in Nova Scotia, Canada, with the Nova Scotia Department of Environment, (the "Registration"). The Registration is a significant milestone in the continued development of the Goldboro Gold Project which is scheduled to start pre-production in 2020. The Registration document will be available for public viewing and comment for 30 days.

"The filing of the Registration document for the Goldboro Gold Project starts the clock on the permitting process and gets us one step closer to pre-production in 2020.We look forward to working with the Government of Nova Scotia, Mi'kmaq of Nova Scotia, Municipality of the District of Guysborough, and local communities on developing the next gold mine in the Province."

https://www.anacondamining.com/2018-07-11-Anaconda-Mining-Sells-4-330-Ounces-of-Gold-in-Q2-2018-Achieves-Record-Quarterly-Throughput

Adrian link

4/17/2019 02:27:17 pm

Great blog Mohnish!

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The New 2018–2019 Uber Cannibals

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