✦ Giving the Money BackNarrow moat

The least conventional bet on this page is that StoneCo's best investment is StoneCo. Year-to-date capital returned to shareholders reached about R$3.6 billion — a distribution yield around 27% — funded partly by the proceeds of the Linx software divestiture² and including roughly R$0.6 billion of ordinary buybacks¹.

Returning a quarter of your market value in a single year is an unusual statement. It says management believes the shares are badly mispriced, that the business generates more cash than its growth opportunities can absorb, and — after the Linx experience — that shrinking the share count is a better use of capital than buying another company. For a business trading at a mid-single-digit earnings multiple, the arithmetic is hard to argue with: every real spent on buybacks retires earnings at a yield no operating project easily matches.

The caution is that buybacks are not a strategy, and a distribution funded in part by asset sales cannot repeat indefinitely. There is also a version of this story where heavy returns signal a management with nothing better to do in a market that is structurally compressing. Watch the share count actually falling, watch what proportion of future distributions comes from operating cash rather than divestitures, and watch whether the multiple ever responds. Buying back cheap shares only creates value if the shares were genuinely cheap.