The Meb Faber Show - Better Investing Michael Mauboussin on Market Concentration, Capital Allocation & Attributes of Great Investors | #545
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Sep 10, 2024 Michael Mauboussin, Head of Consilient Research at Counterpoint Global, shares insights on market concentration and capital allocation. He delves into the implications of stock buybacks and how these financial strategies impact shareholder value. The discussion highlights attributes of successful investors and lessons from figures like Elon Musk. Mauboussin also examines the investment landscape shaped by emerging technologies such as AI, stressing the need for adaptability in modern value investing amid evolving market dynamics.
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Equity Issuance and Buybacks as Signals
- Companies issue equity for various reasons, including stock-based compensation and M&A.
- Stock buybacks and equity issuance send powerful signals about potential future returns.
Buybacks vs. Issuance: Historical Trends
- Total equity issuance has been about $10 trillion, while buybacks have been $14 trillion over the last 25 years.
- Buybacks became more common after the SEC introduced a safe harbor provision in 1982.
Use Shareholder Yield, Not Dividend Yield
- Use shareholder yield (buybacks + dividends / market cap) instead of just dividend yield.
- Shareholder yield is a stronger and more stable signal for returns.