1946 Graham Newman Letter

8/6/2019 1946 Graham Newman Letter

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GRAHAM-NEWMAN CORPORATION, " ',52 WALL S T R E E T ' ~ - ~ " < .nl

: , . :NEW'YORK 5. N. Y ~ ' , ' , ..; '". "... ,Feb .;28th;-'1946.:'o,:,,

';Tei' t h e : S t o c k h ~ l d e r s ; : : o f , G r a h ~ l f ~ ? r o i a l l ; c o - r ~ o l " a , t i O n : , ~ ' :" - " -,' : - - . : - S ' " ~ r ; ; J . ~;:. : ~ : ; ' O ~ : J ~ d a r i : 3 1 s , t ~ 1 9 4 6 ; : " : t h e . : C o m p ~ ~ c c i I i c 1 U ( l ' e d . i t s tenth ' y ~ ~ f ; : 6 L : ; ~ .opera t i o n s ~ ,:Thiseven't makes:!,t ,appropriat ;eto depart, fromfor.Jll.El.r,'s c ; : : : : ~custom and to include ,with our Annual Report some e x t e n d e d c o m m ~ n t , = - ..... , , - ~ - ; . - ,, " - .on our, pol ic ie s, r esul ts and' prospects. '$ ,. ~ ~ - ~ ~ : I - ~ ; . ~ : ; ~ ..General Policy and Over-all Results. ~

The current Prospectus of the Corporationgeneral investment'po1icy is : '' . ~ 5 .sta te s th at i t s I! ..,;" .. '

. ":. ," .- ~ . ~ - ..

, (1) To p ~ C h a s e securi t ies 'at 'prices less than their ~ t r i n s } }value as determined 'by careful analysis, with particular emphasifjon purchase ,of securities at less than their l iquidating value.(2) To engage in arbitrage and h e d g i n g o p e r ~ t i o n s in these curit ies field.This policy means that, in our operations, relat ively l i t t l estress is ,laid upon forecasting the future course of the securitiesmarket or the future prospects of individual companies on a basis'differing materially from their past performance. With regard to"general portfolio operations" - - as distinguished from arbitrage,l iquidation and hedging operations - - i t means that we tend topurchase securities when general sentiment is pessimistic andprices are generally low, and to sell them out in periods ofoptimism and high prices.The over-all results realized by the Corporation in the pastdecade are summarized in Tables I , II and I I I app,ended.We may point out here that, for the t en-year per iod, ' total "earnings before contingent compensation to officers aggregated $245per sha re, as against the original issue price, adjusted, of $99 pershare. or these earnings, $41 per share was paid as contingent compensation and $204 accrued to the s t o c k h o ~ d e r s . Of the la t te r sum,

$161 was paid in cash dividends (including $3.87 as the la te r cash,value of a distribution in kind); $16 represents ' the value of subscription rights offered; and $27 represents the increase in the 'remaining net asset value of the shares.The annual percentage gain to stockholders, based on net assetvalue at the beginning of each year, averaged 17.6%. This compareswith 10.1% in the same period shown by the Standard Stat is t ics Poor's Index of 90 stocks, and 10% shown by the Dow-Jones Industr ia lAverage - - in both cases with allowance for dividends received. /


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- 2 -II i the f i r s t six years: of-operation ,(calendar 1936-1941) _..:. a period of generally declining p r i c e s , ~ _ ourover:"all gain a v e r i l : g e d l l . 8 ~per annq!Il,against, a loss of .6'/>'fo7: ' 'the90-stock average. In the '

past four 'years (calendar. 1942-1945 inclusive) - - a period ofs tead11.y .rising prices - - we averaged 26!3% ' a g a i r i s t ' 2 6 ~ 0 % ' j ' o r ; t h e 9 0 s t ( f c k s ~ ; tInour l a s t .f iscal year, we showed; for the f i r s t time, a lower percentagegain ' thantha t ' , -afthe 'general " m a : r k e t ~ ' These "coinparat'ive resuItf!'":i'ollowdirec' t lyfromour 'investment" policy, whichgrowsm.oreconservative,as,',the market:level' ri"ses. '. '" . '"'.; '. -: .: ,,;;',." ',;Future P o i i c Y ~ d Prosp@ts.


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.3 -provided for.

I f the market should decline substantially, we can not expect i our holdings . to p e . u n a f f e c t e d V b u ~ ; w ! ' l b e E . e y e .thatany shrinkage inthe net asset value or our shares should be moderate in i t sel f ,and relat ively less severetnanthat.shownby the market generally.The chief ,objective of .the management has been to conductgur

o p e r a t i o n ~ so as to show an a t ~ r a c t i v e rate of return on our s ~ ~ e sduring p e ~ i o d ~ when stock prices generally have not moved SUbstantially(net) in either direction. In spite of problems presented by risingand fai l ing markets, we are hopeful. that we shall be able to catq-out this objective in the future as in the past decade. Results for the Year Ended January 31, .

. Submitted herewith is a copy of the report of our auditors, MessrsStern, 'Porter, Kingston ,& Coleman, covering the f iscal year endedJanuary .31, 1946. .The appended balance sheet indicates a net asset value of $ 1 2 5 ~ 8 8per share on January 31, 1946, compared with $131.95 per share onJanuary .31, 1945. These figures give effect to the sale of additionalstock in January, 1946.Dividends of $33.20 per share were paid during the.year, a l lof which have been designated as Capital Gains Dividends, pursuantto Section .362 of the Internal Revenue Code. Subscription rightsissued in January, 1946 had a computed value of $5.20 for each shareowned.The over-all gain for the f iscal year, including the increasein unrealized appreciation, amounted to ,$32 .31 per snare on theaverage number of shares outstanding. This was equal to 24.5% ofthe value at the beginning of the year.The indicated net asset value as of February 21, 1946, wasapproximately $126 per share. "The annual meeting of stockholders is scheduled" to be held on

Monday, April 8, 1946. In connect ion.therewith , it is expected tha tformal notice will be mailed to stockholders before March 30, 1946,together with a proxy statement and request for proxies.Very truly yours,Benj. Graham,PresidentJerome A. Newman,Vice-President &Treasurer .3


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INVESTMENTS IN SECURITIESJAlrI.lARY 31 , 1940(qONTINUED)

NO. OF . DESCRIPl'IONSHA.RIlS OF SECURI'fIES

PREFERRED STOCKS- INDUSTRIALs1,000 Avi8.tion Corp. (The) ~ 2 . 2 5 Cumulative.. Convertible" .500 Cities Servic!"\Compe.:nl $0.00 CumulativePreferred' \ . .300 Giorgio FrUit\Corporation $3.00 .. - Cumulative Participating Preferred500 Gar Wood Industries, Inc. 4 CumulativeConvertible Preferred .0,800 Graham-Paige Motors Co-:rP. Convertible5% Cumulative Preferred .1,000 Jones &Laughlin SteelC6rporation 5%Series B Convertible Preferred290 Mansfield Tire & Rubber Co. Convertible. $1.20 Cumulative Preferred " ,300 The Murray Company $4.50 Cumulative Preferred,,Total =_~ d u s t r i a l Preferred, Stooks' ..PR!>'7ERRBD STOCKS - INVESTMENT COMPANIES -".900 Alleghany Corporetion Cumulative Convertiole

~ 2 . 5 0 Prior Preferred '. _-. . .. . _ ._ ~ ~ _ . _ ~ ... _ ...... _ .. ~ ~ . '

MARKET VALUE. J1JiUARY 31. 1940" .Price Amount80 $ 80,OOO.op". -. . .151 75,500.00'110 33 000.00:J -':Ii02 ' 31,000.00

~ ' 1 - 1 / 4 321,300.00155-1/4 155,250.0032 9,280.0052-3/4 ~ 8 2 5 . 0 0

$'121.155.00

I. _ , '10-1/4 $ 68.025.00, ...- ., .PREFERRED 131'0OKS - UTILITIES3,000 Market Street Railway Company CumulativePrior Preferenoe 6%

300 Twin City Rapid Transit Co. 5% Convertible. Prior Preferred18-1/2 ----55,500.00

1'1,812.50Total - Utilit ies Preferred StocksTOTAL - P ~ F E R R E D STOCKS

. .....

COMMON STOCKS - INDUSTRIALS1,300 A. D. F. Co.100 Amerioan ShipbUilding Company3,890 Bell Airoraft Corporation10,000 Brewster Aeronauticel Corporation2,500 Buda Company3,000 Compania Manufacturers Del Patrero S.A.1,000 Cuban ADarican Me.Lganese Corporation2,200 Electric Boat Company'2,200 L. H. Gilmer Company200 Gisholt Machine Company025 W. F. Hall Printing Company300 International Matoh Realization Company,Ltd.

Forward

;;44-5/832-1/2531-5-1/424-1/83-1122231-1/425-1/4

'1,800.004,402.50126,425.0050,000.00'1'1,500.005,250.0053,0'15.00'1,'100.004,400.0019,531.257,5'15.00

$303,'118.'15


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'NO. OFSiiARES

COMMON STOCKS -

INVESTMENTS liT SECURITIESJANUARY 51, 1946

(CONTINlJED)DESCilIPrIONOF SECURITIES

INDUSTRIhLS (Continued)mRKET VALUE

JA..1IiUARY 51,1946Erice A m o ~

1,0006001,60020010089

Forward;rones to Lamson Machine CompanyMcGraw-Rill l'1l:bl1shing Company Inc.Nipissing Mines Company, LimitedPaoHic Lalls "Pittsburgh Incline Plane Company : 'Pittsburgh Terminal Realization Corporation. ,

Total - Industrial C o m m o n ~ S t o c k s"

,565,718.75.'1-1/2 51.5.P0.0055-1/4 19,9tO,oo4-1/4 6,800.0076-1/2 15,500,00190 19,OQ9.0014-1/2 ...;...L2\iO.2QH E , 7 , . l E ~ .

1152121-1/2

79-1/245-1/4203'3843-1/225

COMMON STOCKS - niVESTMENT COMPANIES .. '1,500 American International Corporation7,400 Carriers and General Corporation1,200 General Shareholdings;Corporation7,000 Pacitic American Investors, Inc.10,600 The Pennroad Corporation5,100 Railway and Light ,Securities Company1,000 Tri-:-ContinantaJ, ,Corporation

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OIWWl-lflOOWf CORPORA'1'IOIl: . l f3l { TOIl!: ....

IlIVESTHEJlT5 II 5EClJRI'1'IES- JAI1IARY : 5 1 , 1 9 ~ 6 ' "

- .....-.'

RailroadsIndustria lsUt1l i t iesReal EstateHolding CompaniesU. 5. Oovernment

Total Bonds

>:'Jl.W'E'1' vduE

.......-W'$1,366, 7 ~ 6 . : 3 9291,500.'9056,330.;:0075,250.(JO .80,137.50307.593.75

$ 2 ! 1 7 7 ! 5 5 7 . 6 ~

PREl"ERRED STOOXSIndustria lsInvestmsnt Companies. Uti l i t i es

Total P re fe rr sd StocksCOMMOK STOCll:8Indus t r ia lsInvsstmsnt C o ~ a n i s s

RailroadsUti l i t i esInsurance CompaniesR.....1 EstateTotal Common Stocke

721,155.0068,625.0073,312.50 863,092.50

~ 5 7 , 5 5 9 . 2 5320,075.00122,192.0042,696.50187,852.501,015.00

$1,131,390.25

Documents

1946 Graham Newman Letter