Henry Singleton was one of the best capital allocators and Teledyne was his masterpiece. Stock buybacks were a big part of its success.

Singleton started Teledyne in 1960 but its story really begins in 1965. That’s the year its stock jumped from $15 to $65.

Singleton took advantage of an enthusiastic market and went on a shopping spree. Over the next five years, he had acquired 130 companies using Teledyne stock trading between 40x to 70x earnings. The shares outstanding quadrupled from 1965 to 1970 (mostly through acquisitions via stock, but also a 3% stock dividend — a dividend paid in shares rather than cash — paid on four of those years).

Then the 1970s bear market hit. Teledyne stock tanked. Its P/E dropped below 10.

An outsider only looking at the stock price would see a horrendous picture. An investment in Teledyne in 1966 would rise 235% by 1968, then tumble to a 40% net loss by 1974. It was a devastating round trip for anyone who hung on. Continue Reading…