Sunday, August 16, 2015

Buffett Partnership Investment: Stanrock

Stanrock Uranium Ltd. was one of the bigger positions in the Buffett partnerships in 1962. It was 5% of the partnership. Stanrock Uranium Ltd. was a Canadian mining company with rights to uranium around Elliot Lake in northern Ontario.

In the 50's uranium was a hot commodity with the proliferation of nuclear weapons in the cold war and the advent of nuclear power. The company traded on the American Stock Exchange as well as in Canada.

The company incorporated in 1956 and declared bankruptcy and went into receivership in early 1959. For some reason which escapes me, the uranium industry hit on hard time in the turn of the decade. Many miners went under. Before bankruptcy the stock traded at around $ 1½. The company fully operated in the early 60s but did not get out of receivership until 1964. During that period the company paid some $41 M to their lenders. In 1961 the company earned $0.9M.

My guess is that Warren Buffett bought the stock just after bankruptcy in 1960 when it traded at around ½ . He must have seen something in the bankruptcy that indicted the company was valuable and the market will see that once it emerges from bankruptcy. When that happened he probably had a easy double in a few years.

Buffett biographer Alice Schroeder mentioned Stanrock in the book the Snowball briefly. But the Buffett Partnership's 1962 statement showed the partnership owned 36760 shares at 13½. Where that price came from is a mystery to me. I know I have the correct company. But the partnership may have not have owned the common stock but the defaulted bonds. Unless Warren Buffett speaks up, this fact will probably be lost to time. The following is the information available from the receiver for 1961.

2 comments:

  1. Hi,

    Thank you so much for writing this article. I was wondering, where did you manage to obtain a listing of the holdings owned by Buffett's partnership from 1962?

    Please advise,

    DGI

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  2. Hi DGI, i didn't notice your comment until now. There is a handwritten list of holdings from 1962 included in recent editions of "Of Permanent Value" by Andrew Kilpatrick. I can email you my pdf copy if you email me. My email is simply the name of this blog at gmail.com

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