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The New 2019–2020 Uber Cannibals

In late December 2016, I co-wrote an article on Forbes.com that introduced the Uber Cannibals,” a 5-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. 

We are now ready for the April 2019 picks.

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 annually in April. The 2018 – 2019 Uber Cannibals were:

  1. Sleep Number Corp. (SNBR)
  2. Corning Inc. (GLW)
  3. PulteGroup (PHM)
  4. Discover Financial Services (DFS)
  5. Lear Corp. (LEA)

 
As of 3/29/19, Sonia’s $100k was worth $136,656 (after trading costs), up 36.7%. If Sonia had instead invested in the S&P 500 over that period, she would be up 32.4% and her portfolio would be worth approx. $4k less, or $132,389.

Please note, Uber Cannibals performance includes trading costs and also assumes that stocks are bought at the high price of the day and sold at low price of the day, whereas S&P 500 and Small Dogs of the Dow performance does not include trading costs and assumes that stocks are bought at last close.

Last 12 Months

Since 1/3/17

 Value of $100K invested on 1/3/17

Uber Cannibals

4.1%

36.7%

$136,656

S&P 500

9.5%

32.4%

$132,389

Small Dogs of the Dow

19.4%

28.3%

$128,288

 

Corning, PulteGroup, Discover and Lear paid dividends totaling $1,950. Per our rules, Sonia reinvested those dividends back into the same businesses.
 
Below is the 1 year return of the 2018-2019 Uber Cannibals:

Company

1 year return

Sleep Number Corp.

33.7%

Corning Inc.

21.6%

PulteGroup

-3.8%

Discover Financial Services

1.0%

Lear Corp.

-25.8%

 

The Uber Cannibals 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 the Ubers are doing quite well! I am happy to see that Sonia is doing quite well so far.
 
The New Uber Cannibals:
 
For 2019 – 2020, our algorithms selected the following five Uber Cannibals:
​

  1. Sleep Number Corp. (SNBR)
  2. Corning Inc. (GLW)
  3. Asbury Automotive Group Inc. (ABG)
  4. Quanta Services Inc. (PWR)
  5. Allison Transmission Holdings Inc. (ALSN)

Sleep Number Corp. (for the second time in a row) and Corning Inc. will continue to be in the portfolio for yet another year. But we have three new kids on the block.
 
If you invested in the Uber Cannibals in April 2018, then leave Sleep Number Corp and Corning untouched, and sell PulteGroup, Discover and Lear Corp. Then invest the proceeds equally among the three new kids: Asbury Automotive, Quanta Services, and Allison Transmission Holdings. 

If you invested in the Uber Cannibals in April 2018 in a taxable account, try to sell the winner (currently Discover Financial Services) after holding it for at least 366 days and the losers (PulteGroup and Lear Corp) 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 2020, when I’ll provide the 2020 – 2021 portfolio on www.ChaiWithPabrai.com. Happy Cannibal Investing!

The five-stock Uber Cannibals strategy can be combined with the five-stock Shameless Cloning and Spinoffs strategies into the 15-stock Free Lunch Portfolio. While the Uber Cannibals rebalance in April, the Shameless Cloning and Spinoffs rebalance in December. You can find the 2019 picks for Shameless Cloning and Spinoffs in my post from December 2018.  

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

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This article was originally published on Mohnish Pabrai’s blog Chai with Pabrai.
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