There’s a fund that has been outperforming Warren Buffett’s Berkshire Hathaway for years, and if you haven’t heard about it, you might want to take notice — several investment analysts say it’s set to continue to soar in 2022. Central Securities Corp., which trades on the New York Stock Exchange under the ticker “CET,” has operated as a closed-end investment company with the primary objective of growth of capital since October 1, 1929.
The fund, with $1.3 billion in assets, has outperformed the Oracle of Omaha’s fund over the past 20 years. Over the past 25, 30, 40 and even nearly 50 years, it has beaten the S&P 500, according to The Wall Street Journal.
The fund’s CEO, 89-year-old Wilmot H. Kidd III, shares some of Buffett’s steadfast mottos of holding steady and being patient as being key to investing.
For example, Central has owned Analog Devices, its second-largest position, for 34 years, according to the WSJ.
Kidd, who will step down as CEO on Dec. 31 yet remain chairman, told the WSJ: “It’s when you’ve been fortunate enough to make an investment in a great company, and suddenly you realize just how very lucky you were, and you buy more. That’s skill, I suppose. That — and holding on to what you have and not chickening out.”
Central Securities Holds Alphabet, Motorola and More
CET also shares Buffett’s penchant for large cap stocks — an investment provides exposure to companies including Alphabet, Motorola, Charles Schwab, and Buffett favorite American Express, according to BNK Invest.
Among its other top 10 holdings are The Plymouth Rock Company, the aforementioned Analog Devices and Capital One, according to the firm’s website.
Seeking Alpha also likens the fund’s style to Berkshire Hathaway’s, and calls it “old-school” because it is unleveraged, distributes dividends only twice a year and has had a very stable management team.
“This fund does not chase the newest, shiniest transformative performers, but is a stable, long term investment vehicle with one concentrated bet via a non-listed insurance company,” according to Seeking Alpha.
The Wall Street Journal reports that if you had invested $10,000 in Central Securities at the end of March 1974, when Kidd took over, you would have had nearly $6.4 million by the end of this October, according to the Center for Research in Security Prices. In comparison, the same amount put into the stocks in the S&P 500 would have grown to $1.9 million. Central Securities grew at 14.5% annualized with dividends reinvested versus 11.7% for the S&P 500 stocks, the WSJ adds.
The fund’s annualized portfolio turnover rate has averaged 11% over the past 15 years, meaning it holds its typical stock for nearly a decade — six times longer than the average active mutual or closed-end fund — per the paper.
Holding stocks longer than traditional fund managers might enables CET to minimize the costs of trading and reduce the burden of researching new holdings. This strategy also allows the firm to deeply understand a business, the WSJ details.
“We want to own growing companies during as much of their period of growth as we can,” Kidd told the outlet. “It takes time to learn to live with an idea,” he says. “All these portfolio managers [who sell stocks within a year], I don’t believe they even know what they own.”
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