AutoZone revealed a stunning fact in its September earnings call:

'We have bought back over 100% of the then outstanding shares of stock since our buyback inception in 1998, while investing in our existing assets and growing our business.'

In 1998, the year AutoZone began its repurchase program, the company had 152 million shares outstanding. AutoZone has since repurchased a total of 154 million shares at an average price of $219, for a total investment of $33.8 billion. Shares outstanding fell 8.2% per year, on average. The average repurchase price is 91% lower than AutoZone's current $2,500 per share price.

This is incredible from a variety of perspectives. First, it is an example of excellent capital allocation. Second, it implies that AutoZone has been structurally mis-priced for decades. Third, AutoZone's $46 billion market capitalization shows the true cost of stock compensation.

Companies like Berkshire Hathaway and Constellation Software are remarkable because they have almost not capital allocation 'leakage.' They pay their employees in cash so that their share count holds steady.

These are some of the best performing stocks of all time, so I don't buy the idea that employees need to be paid in cash so that they feel they have skin in the game. Skin in the game is different when you've spent your own money on shares versus when you've been given shares.

eaglepointcapital.substack.com - Autozone the real cost of stock compensation