In short: A famous buyback compounder (80-90% of the stock retired over two decades) that he passed on outright: with the founder gone, "something like 40 or 50% of the shares that they buy back end up in the pockets of the managers" — the knights managing the castle are feasting. "When I see that, it immediately says to me: we're done." On the friend who owns it as a small position because of the issue: "why would you want to be slightly in bed with a crook?"
NVR is a US homebuilder famous among value investors for having bought back 80-90% of its own shares over two decades instead of paying dividends — mechanically making each remaining share worth much more, and delivering superb returns. Pabrai looked at it recently and passed outright.
The reason is what happens to those repurchased shares now that the founder is gone. Roughly 40-50% of the stock the company buys back ends up handed to the current managers as compensation — so shareholders are funding an enormous pay package rather than shrinking the share count. In his imagery, "the knights who are managing the castle" are having an excessive feast. "When I see that, it immediately says to me: we're done."
The transferable rule is the sharper part. A fund-manager friend owns NVR as a deliberately small position because of the pay problem — and Pabrai finds that indefensible: "why would you want to be slightly in bed with a crook?" With 50,000 listed companies available, management greed is a free, costless reason to move on. (He grants Elon Musk an exception on pay, since the targets attached to it are near-impossible.)
40:19The business is being run very well. But something like 40 or 50% of the shares that they buy back end up in the pockets of the managers. Okay? So, the amount of compensation that's going to the knights who are managing the castle, the feast that the knights who are managing the castle are having is excessive. When I see that, it immediately says to me, "We're done.
Nothing matches this filter.
Verbatim excerpts from the public transcripts (auto-pulled at each mention's timestamp, lightly cleaned). Timestamps link into the video; "source page" opens that commentator's full analysis at this row. Click a mention's header line to expand it (one open at a time). For personal study — not investment advice.