Fund manager Amit Chokshki attended the 3rd Annual New York Value Investing Congress this week on behalf of Seeking Alpha. Here are Amit's notes from the presentation of Leon Cooperman, Omega Advisors:
Leon Cooperman’s presentation consisted of two parts. The first presented a case study on Teledyne (TDY) and founder/CEO Dr. Henry Singleton’s track record in terms of capital allocation:
- Warren Buffett considers Singleton one of the best allocators of capital in American Business.
- Singleton was a PhD (scientist) as opposed to an MBA/business student.
- Singleton was a pioneer in terms of stock repurchases and spin-offs.
- Stock generated a 23% compound annual growth rate over Singleton’s tenure from 1961-96.
Cooperman focused on Singleton’s astute use of capital with regard to share repurchases and tied that into the second part of his presentation which focused on the value of share buybacks:
- Cooperman classifies share buybacks into four categories:
- Type I: Combats the impact of option dilution
- Type II: Assists executives that are exercising options
- Type III: Company has no opinion on value but the buyback is done to return capital to shareholders
- Type IV: Company believes the stock is undervalued and repurchases share
- Key questions during a buyback include:
- Is the company buying shares at a discount to private value or merger market value?
- What’s the impact on cash flow per share and EPS?
- Does it adversely impact the company’s risk profile (highly leveraged buybacks)?