Black, Sivalls & Bryson, Inc. (circa 1962) = Cigar Butt

Here is another holding from the 1962 year-end statement of the Buffett Partnership Ltd. Black, Sivalls & Bryson, Inc. (BS&B) was the 18th largest holding (18/54) accounting for 1.8% of the net assets. Buffett owned 13,353 shares @ $13.31 per share, totaling $177,762.

This company was a cigar butt! It manufactured bolted and welded steel and wood tanks, separators and dehydrators, heaters, valves, etc., for use in the oil and gas and chemical processing industry. It also manufactured grain and propane tanks, as well as moldings and trim for the auto, refrigeration and appliance industries. The company had 510,250 common shares outstanding for a market cap of $6.8 million. In 1961, it earned just over $0.9 million after-tax, or $1.39 per share, but it was most likely the balance sheet which drew Buffett to this company. At year-end 1961, it had $36 per share in net current assets (current assets less current liabilities) and $24.25 per share in net-net current assets (current assets less total liabilities). Even if you classify the preferred stock as debt, net-net current asset value is $17.26 per share. The company had $2.84 per share in cash and owned over 750,000 square feet of real estate in Missouri, Oklahoma and Texas. I have no idea when BPL purchased BS&B, but it would appear to me that at $13.31 per share, there was a significant margin of safety in the nearly 50% discount from net-net current asset value, exactly what Buffett was looking for in those days.