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Quantitative Value, + Web Site: A Practitioner's Guide to Automating Intelligent Investment and Eliminating Behavioral Errors by Wesley R. Gray, Tobias E. Carlisle

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CHAPTER 9

Blue Horseshoe Loves Anacott Steel: Follow the Signals from the Smart Money

“The companies in which we have our largest investments have all engaged in significant stock repurchases at times when wide discrepancies existed between price and value. As shareholders, we find this encouraging and rewarding for two important reasons—one that is obvious, and one that is subtle and not always understood. The obvious point involves basic arithmetic: major repurchases at prices well below per-share intrinsic business value immediately increase, in a highly significant way, that value.

The other benefit of repurchases is less subject to precise measurement but can be fully as important over time. By making repurchases when a company's market value is well below its business value, management clearly demonstrates that it is given to actions that enhance the wealth of shareholders, rather than to actions that expand management's domain but that do nothing for (or even harm) shareholders.”

—Warren Buffett, Shareholder Letter, 19841

Henry Singleton is most notable for two achievements: building Teledyne from scratch into one of the most profitable and successful stocks in the United States at the time he stepped down 29 years later, and for his “almost arrogant scorn for most conventional business practices.”2 Warren Buffett has described Singleton as a “managerial superstar,”3 saying that he had “the best operating and capital deployment record in American business.”4 That is ...

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