Compounding Machines

Young Spring & Wire Corp.

with 4 comments

 As readers of this blog know, I am fascinated by investments the Buffett Partnership made in the 1950s-1960s. Back then with limited capital, Buffett could invest money in virtually any company regardless of size.  For example, at year-end 1962 Dempster Mill Manufacturing was the largest position (23% of the portfolio). Dempster had a market cap at the time of $3.1 million, or about $21 million in today’s dollars. Below is another mini-case study.

The following is the Moody’s sheet from 1962 for Young Spring & Wire Corp. It was the 7th largest position at year-end 1962, or about 5% of assets.  BPL owned 19,165 shares, or about 4.5% the company. As with investments discussed previously, it is impossible to know when and at what price Buffett first purchased the stock, but he did “dance” in and out of positions more frequently back then.

Young Spring & Wire had three business lines including: automotive (seat and back springs), equipment (dump truck and trailer bodies, etc) and electronics (receivers, transmitters, amplifiers, etc.). The company had lost money in 1960 and 1961 (-$1.9 mm and -$1.4 mm respectively)  which leads me to believe this was yet another Ben Graham-type balance sheet bargain. Indeed, the company was debt-free with $3 million of cash and equivalents and net current assets of $27 per share and net tangible assets of $48.36 per share. At $25.50, the company had a market cap of $10.9 million ($76 million in today’s dollars). This investment was likely made based on the fact that it was trading below both net current asseets and tangible book value.

 I hope others find these mini case studies intersting as well.

young-spring-wire

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Written by sdinvest

March 13, 2009 at 8:09 pm

Posted in Uncategorized

4 Responses

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  1. Bravo — keep it coming!

    Ben Tanen

    March 13, 2009 at 11:33 pm

  2. We second that. This are superb.

    greenbackd

    April 23, 2009 at 10:04 am

  3. *This* are superb? Sorry, *these* are superb.

    greenbackd

    April 23, 2009 at 10:05 am

    • Thanks Greenbackd. I have several more I will post. I am a big fan of your website by the way.

      sdinvest

      April 28, 2009 at 7:14 pm


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