Just in the nick of time Buffett, Munger and Koeppel took a large proportion of the money devoted to supporting Wesco’s savings and loan business and made it available for investment elsewhere.
Some of that money was sent up the ownership chain. Indeed, by early 1982, almost as much as Blue Chip had paid for its 80% stake had been received from Wesco in the form of dividends – see table. This was put to very good use buying controlling interests and non-controlling interests in some great companies (fascinating stories for me to tell in future Newsletters).
Calendar Year | Blue Chip’s average equity in Mutual Savings as carried in Blue Chip’s consolidated balance sheet | Blue Chip’s share of the cash dividend paid by Mutual Savings during the year | Annual percentage return on Blue Chip’s equity from the Mutual Savings dividend |
1975 | $11,975,000 | $1,932,000 | 16.1% |
1976 | $20,570,000 | $3,226,000 | 15.7% |
1977 | $23,928,000 | $3,845,000 | 16.1% |
1978 | $25,285,000 | $5,287,000 | 20.9% |
1979 | $25,630,000 | $6,728,000 | 26.3% |
1980 | $22,381,000 | $9,852,000 | 44.0% |
1981 | $18,778,000 | $1,922,000 | 10.2% |
Source: Blue Chip stamp chairman and president’s letter, 1981, Charles T. Munger, Chairman of the Board Donald A. Koeppel, President
With the money retained in Wesco, Louis Vincenti did a great job of guiding the rump Mutual Savings business. Munger and Buffett heaped praise on him. As well as getting good returns in the efficient low-cost S&L, he was doing something alien to so many managers; he was gradually shrinking his business, which goes directly against the natural instinct of empire conscious executives. This was all for the sake of greater shareholder returns:
“Louis Vincenti, a chief executive well past normal retirement age, has guided Mutual Savings very………To read the rest of this article, and more like it, subscribe to my premium newsletter Deep Value Shares – click here http://newsletters.advfn.com/deepvalueshares/subscribe-1