Crushing the S&P 500 for 50 years

No hype, no nonsense, no BS.

An investment that draws zero attention, but through persistence, patience, and discipline grinds ahead to create amazing wealth for its investors.

Central Securities Corp. (NYSE: CET) has been grinding ahead to create amazing wealth for its shareholders for the past 94 years.

Central Securities Corp. opened its doors on Oct. 1, 1929.

Stock market historians might raise an eyebrow at the debut datte. October and 1929 conjure an important event.

They are the month and year when the Wall Street Crash of 1929 occurred, which then segued into the Great Depression.

Central Securities Corp. survived, and here it is 94 years later.

So, what am I referring to?

Central Securities Corp. is no operating company, it’s a closed-end fund (CEF).

I suspect that it’s CEF you had no idea existed. (Few investors are even aware that CEFs exist). 

It manages only $1.2 billion in assets, institutional investor interest is scant. Only 17,000 shares on average change hands daily.

And the attraction?

I mentioned amazing wealth creation for its investors. 

Central Securities Corp. has outflanked the S&P 500 by an average of two percentage points each year for the past 50 years.

That’s a big difference and a big deal in building and compounding wealth when playing the long game.

A long-term investment in Central Securities Corp. or the S&P 500? You tell me. 

Even more impressive, Central Securities Corp. has held its own against the mighty Berkshire Hathaway (NYSE: BRK.b) over the past 25 years.

(FYI: Both examples include dividend reinvestment.)

I invoke a Berkshire comparison for a reason.

Central Securities Corp. is “Berkshire-esque’ in that it runs a concentrated portfolio.

It owns 28 publicly traded stocks. Larger blue-chip companies dominate the list. The top-ten holdings account for 60.5% of NAV.

Central Securities Corp. invests with conviction, and because it invests with conviction, it holds, and holds, and holds some more. Turnover is measured in years, and frequently decades.

Central Securities Corp. mimics Berkshire Hathaway in another way: Its fondness for insurance. 

Central Securities Corp.’s largest investment (21% of net asset value) is not a publicly traded company. It is the privately held Plymouth Rock Company, a regional insurance company headquartered in Boston.

Central Securities Corp. has owned its Plymouth Rock stake for 41 years. 

Central Securities Corp. and Berkshire Hathaway part ways on dividend policy. Unlike Berkshire, Central Securities Corp. pays a dividend. 

It’s a biannual affair. The first dividend is static and small – $0.20 per share – and paid in May.

The second dividend is variable and considerably larger and paid in December. It has ranged between $0.80 and $3.55 over the past ten years.

The beauty of a great investment is that it compounds wealth over time, and you’re mostly unaware of the compounding, as it should be. The emotions are rarely roiled.

And when the emotions are rarely roiled, the impetus to act against your interest, another impediment to wealth creation, rarely occurs.

And therein lies the beauty of Central Securities Corp – amazing wealth creation that includes restful nights.

Good Fortunes,

Steve Mauzy