Should Value Investors Buy Central Securities Corp (CET) Stock?

·4 min read

Third Avenue Management recently released its Q1 2020 Investor Letter, a copy of which you can download here. The Third Avenue Small-Cap Value Fund posted a return of -29.59% for the quarter, outperforming its benchmark, the Russell 2000 Value Index which returned -35.66% in the same quarter. You should check out Third Avenue Management's top 5 stock picks for investors to buy right now, which could be the biggest winners of the stock market crash. There weren’t a lot of funds who could deliver these kinds of returns without shorting the market or using aggressive put options.

In the said letter, Third Avenue Management highlighted a few stocks and Central Securities Corp (NYSEAMERICAN:CET) is one of them. Central Securities is a publicly owned self managed investment trust. On June 15, Central Securities Corp (NYSEAMERICAN:CET) stock had a closing price of $28.94. Here is what Third Avenue Management said:

"Central Securities is a distinctive closed-end investment company that has been on Fund Management’s radar for some time. After monitoring the company for a number of years, the recent volatility in the markets created an unusual opportunity to invest in Central at a large discount to the value of its unique portfolio of high-quality holdings. Although Central is not especially well-known within the closed-end fund universe, it is one of the oldest, originating in 1929, and our assessment is that it is assuredly one of the most successful.

Central is led by long-time CEO and owner-operator Wilmot Kidd who has quietly amassed one of the most successful long-term track records in the investment industry. Over the last four decades, Central has compounded value on a pershare basis at north of 13%, dramatically outperforming the broader market. Unlike a majority of peers, Central has achieved this unusually long track record with an absence of leverage, which has created pitfalls for peers over the years. Kidd also shares our views regarding patience and a willingness to hold cash. Although he very seldom engages with the press, or in any form of promotion, Kidd did express in one of his rare interviews a belief that investment managers add most of their value in bear markets.

Perhaps the most intriguing aspect of Central is its largest holding, a private insurer named Plymouth Rock, which itself has a remarkable track record of compounding value and is led by another skilled owner-operator, Jim Stone. Central’s investment in Plymouth is particularly noteworthy given our assessment indicates that Plymouth is a very high-quality insurance operator whose intrinsic value is well north of Central’s carrying value of the asset and a source of hidden value for Central shareholders."

Our calculations showed that Central Securities Corp (NYSEAMERICAN:CET) isn't ranked among the 30 most popular stocks among hedge funds.

The top 10 stocks among hedge funds returned 185% since the end of 2014 and outperformed the S&P 500 Index ETFs by more than 109 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds' poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Below you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

Video: Top 5 Stocks Among Hedge Funds

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. You can subscribe to our free enewsletter below to receive our stories in your inbox:


Disclosure: None. This article is originally published at Insider Monkey.

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