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The New 2018–2019 Uber Cannibals

On December 22, 2016, I co-wrote a Forbes article, “Move Over Small Dogs of The Dow, Here Come The Uber Cannibals. It introduced the “Uber Cannibals portfolio, a five-stock investing strategy that rebalances in April of every year and invests in businesses that aggressively buy back their own stock.  

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, I introduced Ms. Sonia Patel, who had embarked on the 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:

  1. Lowe’s (LOW)
  2. NVR (NVR)
  3. The Hackett Group (HCKT)
  4. Select Comfort (SCSS)
  5. Willis Lease Finance (WLFC)

 
As of 3/29/18, Sonia’s $100k was worth $130,646 after trading fees, 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:

  1. Sleep Number Corp. (SNBR)
  2. Corning Inc. (GLW)
  3. PulteGroup (PHM)
  4. Discover Financial Services (DFS)
  5. 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!
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This article was originally published on Mohnish Pabrai’s blog Chai with Pabrai.
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