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Wall Street’s 3 Favorite Buyback Stocks for Explosive 2024 Upside

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Buyback stocks refer to companies aggressively repurchasing their own shares when they are undervalued. This strategy efficiently allocates capital to buy out external shareholders at discounted prices. Remaining investors win big through accelerated earnings per share growth.

As investing legend Charlie Munger wisely advised, “Pay attention to the cannibals.” He was referring to cash-rich firms with share prices trading below intrinsic value. By concentrating ownership amongst fewer outstanding shares, buyback stocks directly boost shareholder returns.

Below are three inflation-resilient buyback stocks poised to supercharge EPS as runaway market leaders in their industries. Specifically, these are high-quality, low-CAPEX companies with strong underlying businesses that can thrive amid economic uncertainty. Critically, these stocks boast substantial cash reserves to fund massive repurchases while remaining undervalued. For example, if a company earns $10 per share and buys back 50% of outstanding shares, EPS doubles to $20 per share. Consequently, the stock price should follow suit. As Mohnish Pabrai explains regarding the “magic of buybacks,” after repurchasing 80%+ of shares, EPS and share price growth accelerate exponentially.

AutoZone (AZO)

An AutoZone (AZO) storefront in Saint Augustine, Florida.

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AutoZone (NYSE:AZO) is one of Wall Street’s favorite buyback stocks that could see explosive upside in 2024. This automotive parts retailer has consistently repurchased its shares over the past decade. It has resulted in a 50% reduction in shares outstanding since 2010.

The company announced in December 2023 an additional $2 billion stock repurchase program. This brings the total authorized repurchases to $37.7 billion since 1998. The company has stated it can fund these buybacks while maintaining investment-grade credit ratings. AutoZone bought back $900 million of its shares in 2022 alone.

Financially, AutoZone is in a strong position to continue these repurchases with a profitable business even in inflationary times. The company achieved record sales and earnings per share in fiscal 2022. With steady top-line growth expected and shares outstanding declining 7-9% annually, earnings per share could grow at an accelerated pace. AutoZone’s consistent history of buying back sizable amounts of shares makes it a favorite Wall Street buyback stock pick for big upside in 2024 and beyond. The company’s financial strength and inflation-resistant model provide further reason to be optimistic.

NVR (NVR)

The logo for NVR is seen on the top of an office building.

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NVR (NYSE:NVR) is a prominent homebuilder and mortgage banking company that has consistently repurchased its shares, making it one of the more interesting buyback stocks. As recently as November 2023, NVR announced a new $750 million share repurchase authorization, continuing its long-standing capital return program that originated in 1994.

NVR’s share repurchases demonstrate management’s focus on maximizing shareholder value alongside disciplined capital allocation. As of September 2023, NVR’s outstanding shares declined to 3.2 million, confirming significant buyback.

NVR builds and sells homes under brands including Ryan Homes, NVHomes, and Heartland Homes across 35 metro areas in 15 states. Considering that over 535,000 homeowners have trusted NVR, the company has a stable underlying business, making it inflation-proof.

Financially, as of December 2023, NVR held a strong cash position. It’s nearing $3.13 billion alongside $13.37 billion in retained earnings on its balance sheet. Furthermore, for 2023, NVR generated $1.59 billion in net income. Additionally, it generated $9.31 billion in homebuilding revenues. Factoring in consistent share repurchases, solid financials, and steady housing demand, NVR is one of the more compelling buyback stocks.

Ameriprise Financial (AMP)

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Ameriprise Financial (NYSE:AMP) is a leading asset and wealth manager, helping individuals grow and protect their financial assets. The company has proven itself to be one of the most reliable buyback stocks. For example, the Board recently approved an additional $3.5 billion in share repurchases through September 2025. Clearly, this continues Ameriprise’s track record of returning capital to shareholders, reducing its share count by 25% since 2018.

In addition to its credentials as a steady buyback stocks executor, Ameriprise generates strong operating results that provide inflation resilience. For example, revenue grew 8% in Q4 2023 on the back of solid asset flows and higher net investment income. Furthermore, earnings expanded 10% for the quarter and 14% for the full year, even in a turbulent market. Excellent profitability was maintained as well, with a 48.5% return on equity.

Ameriprise is one of the top buyback stocks, considering its commitment to substantial buybacks and financial outcomes demonstrating economic durability. The reliability of its capital return program and inflation-fighting operating performance cement its status as a leader in the financial services industry.

On the date of publication, Andrea van Schalkwyk did not hold (either directly or indirectly) any positions in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Andrea van Schalkwyk is a value investor who adheres to the principles of the renowned Warren Buffett and his mentor Benjamin Graham. He holds a Master of Engineering (MEng) from the University of Padua and an Executive MBA from the CUOA Business School.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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