Olin capital allocation drives shareholder yield
Olin Corporation represents an attractive value investment because it aggressively returns capital via share buybacks in a mature industry with no reinvestment needs.
The argument
The guest highlighted Olin as a prime example of a business that cannot reinvest in capacity but creates immense value by shrinking its share count from 165 million to 115 million shares at very cheap prices.
The thesis, stress-tested
✓ What validates it
- ✓Continued reduction in outstanding share count in upcoming quarterly filings
- ✓Maintenance of high free cash flow conversion despite macro headwinds
▸ Risks discussed
- ▸Cyclical downturns in the chemical/chlor-alkali markets could crimp free cash flow
- ▸Management could abandon the buyback discipline to pursue value-destructive M&A
Hear it yourself
"There's no reinvestment opportunity to that business. And in the last five, six years, they've taken the share count down from a 165,000,000 shares to a 115,000,000 shares."
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