​At the start of 1995 an investment bank approached Bill Child with an offer to buy R. C. Willey Home Furnishings. The headline figure mentioned was $200m. This followed separate approaches by two publicly traded retailers. These were totally unsolicited. After looking around stores of the two retailers and being unimpressed by the way the furniture was presented Child decided that they were a poor fit for R. C. Willey.
As for the investment bank, the $200m was not all it seemed. The bank would only put up $100m in cash, borrowing the other $100m using R.C. Willey’s assets as collateral. The company would thus deteriorate from having a very conservatively managed balance sheet to a risky one. True, Bill and Sheldon would walk away with a lot of money, but their creation would be lumbered with debt, making it, and all the livelihoods that depended on it, vulnerable. They hated that thought.
Bill was 63 and, cognizant of his father-in-law’s death at 54, was fully aware that there was a possibility of him suddenly leaving a mess for his survivors to sort out.  He wanted the business, with its loyal associates, customers and suppliers, to go on decades after his lifetime. This outcome was unlikely if he sold to one of Wall Street financial engineering players or to a less able retailer. Sheldon was six years younger and would be a natural successor, but he was increasingly drawn to the Church.
While pondering this problem, in January 1995, Bill attended the San Francisco Furniture Mart Trade Show where he met his old friend Irv Blumkin, CEO of Nebraska Furniture Mart.  The Blumkin family had faced a similar issue in 1983 and found the solution to be to sell most of the shares in NFM to Berkshire Hathaway.
Bill was curious regarding life over the intervening 12 years. Irv responded in such positive terms – Buffett had kept every promise and was the best of business partners, and the family were still in managerial control – that Bill asked him “do you think Warren would be interested in buying our company?”
Irv greatly respected R. C. Willey as one of the best managed furniture businesses in the country and Bill as an excellent and principled manager.  He said that Buffett would, most likely, be interested and offered to introduce Bill to Warren to explore the possibility.
Bill talked it over with Sheldon who immediately agreed that a sale to Berkshire would be an excellent solution.  A few days later Bill asked Irv to please go ahead and contact Buffett.  Irv was due to have dinner with Buffett a few days later and promised to raise R. C. Willey then.
It wasn’t the first time they had discussed R. C. Willey because for years Buffett had probed Irv with the question “Are there any more at home like you?” To which Irv had responded that scattered around the country were three other very well managed furniture retailers, one of which was R. C. Willey (the other two come into the Buffett story later). In his 1995 letter Buffett said that over the years Irv had told him about the company’s strengths, so he was already familiar with the firm.
Warren and Bill speak
In mid-February Irv rang to give Bill the good news. Buffett was really interested and would call.  Only a few minutes later he did, “This is Warren Buffett, Bill. I just talked to Irv, and I understand you have an interest in selling your company.” (In Benedict, Jeff (2009) How to build a business Warren Buffett would buy: the R.C. Willey story)
Buffett was particularly keen to know why Bill wanted to sell.  “I want to be sure the company continues beyond my lifetime. Second, if anything were to happen to me or my wife the business would have to be sold at a fire-sale price to pay the estate tax.” Child replied.
Buffett needed good management in pl………………To read more subscribe to my premium newsletter Deep Value Shares – click here http://newsletters.advfn.com/deepvalueshares/subscribe-1

​Bill Child took a 600 sq ft store with annual revenue of $250,000 to a dominant position in Utah furniture retailing with $256m turnover. For him to succeed he had to follow sound principles to gain the trust of customers and the admiration and loyalty of employees. These are useful pointers for investors: if you see this sort of combination being implemented at a company it is likely to be one with a bright future. Fortunately for us he has written about his rules for success:

1. Be motivated by excellence, not money. If you are better than your competitors, the profits will come.
2. Offer customers true value on quality products. A low price on a cheap piece of furniture is not value.
3. Think like a customer and treat them as you would like to be treated. They can take their business elsewhere at any time. (Associates witnessed daily the commitment of Bill and Sheldon to customer service. They too went out of their way for people).
4. Enjoy your business and know the industry and its future.
5. Avoid unnecessary debt. When the economy takes a downturn, excessive debt will sink you.
6. Be efficient. Nothing drains………………To read more subscribe to my premium newsletter Deep Value Shares – click here http://newsletters.advfn.com/deepvalueshares/subscribe-1

Bill Child looked for way to build profits of the 600 sq ft electrical store off a side road near Syracuse, Utah, that he had accidentally taken leadership of in 1954. In 1956 he hit on the idea of selling furniture – items, thankfully, without the burden of moving parts or onerous warrantees. At first, a few pieces were placed in Child’s personal double garage and customers in the main store were encouraged to take a 50-yard stroll to take a look.  In particular, the sofas were a great hit, selling out very quickly. So, a decision was made in 1957 to add 1,800 sq ft to the store’s footprint.
Bill really needed help in the showroom now. His 18-year old brother, Sheldon, enthusiastically accepted the offer to work part-time. When Sheldon went to college in Utah he would drive home to work Saturdays. This was mostly deliveries and installations with Roy Hudson, the recent hired deliveryman. Sheldon was superb at demonstrating the workings of the appliance. He moved into RC and Helen’s old home right next to the store, so he could work more hours at a job he loved.
The move into furniture worked; company revenue doubled in a year. Both a full-time and a part-time salesman were hired, and the store was extended again. Sheldon was approached to take on a salesman’s role. This he accepted to pay his way through college. But he too had retained ambitions to be a teacher. As his final year approached (fall 1959) Bill said to his brother “I’m not going to tell you what to do. But if you’re going to teach, then you ought to go back to school. But if you’re going to stay in the furniture business, I don’t think a degree will make a difference…You could spend a year working and then decide whether to go back to school” (Bill quoted in Benedict, Jeff (2009) How to build a business Warren Buffett would buy: the R.C. Willey story). Sheldon agreed.
That year was one a rapid expansion, with more product lines added, and more salesmen coming on board. It was exciting. Sheldon and his wife built their own home next to Bill’s and were starting to accept that Sheldon was unlikely to return to college.
More extensions to the store were added to make it, by 1965, the largest furniture store in Utah outside of Salt Lake City. The out of the way position was turned to an advantage with advertising slogans such as, “Lower overhead means lower prices because of our country location”.  People drive a long way to find a bargain.  Employee numbers rose to fifty full-timers.
Sadly, in Spring 1965, Bill’s wife Darline died aged 31 from a rare condition causing blood clots, leaving a devastated Bill and two boys and two girls. The whole family were rocked to the core, but found some strength from their Mormon faith, with a strong belief in families reuniting in heaven.  Bill kept himself extraordinarily busy to avoid thinking too much.
Diversification
Near to Syracuse was the Hill Air Force base employing more than 20,000 civilians and 3,000 military personnel.  Not only did R.C. Willey benefit from the wealth brought to the area via wages for civilians but air force people were moved around, and they tended to buy furniture and appliances when they set up home in Utah.
The base was a blessing, but also posed a threat. It was possible – and there were rumours to this effect – that the base could be downgraded resulting in fewer people. Bill saw that R.C. Willey’s income was over-concentrated in one place. As much as two-thirds of revenue could be linked to the base.
The solution was to replicate the low-price-excellent-service formula in another store sufficiently far away that it pulled in different customers.   A four-acre site at Murray south of Salt Lake City, 36 miles from Syracuse, seemed ideal. A successful TV campaign had already raised the company’s profile through the area, so the brand was well-known in Utah way beyond Syracuse.
It took until 1969 to open the 20,000 ………………To read more subscribe to my premium newsletter Deep Value Shares – click here http://newsletters.advfn.com/deepvalueshares/subscribe-1

When 22 year old Bill Child intended to graduate and become a teacher. Things turned out differently.  He instead built a business that was sold to Warren Buffett's Berkshire Hathaway for $175m.  It had a very unpromising start. However the early days imbedded the values - and hence reputation, and then to competitive advantage - which led to later success.
Teacher Bill
Bill Child, in 1951, married RC and Helen’s youngest daughter, Helen Darline (they were sweethearts from childhood).  Greatly helping him in his ambition to be a teacher, Bill had recently gained a scholarship to study at the University of Utah. A few months later, when Darline was expecting a child, RC and Helen gave a small piece of land 50 yards from the 600 sq ft store for Bill and Darline to place a modular house.
Bill worked the summer at the store. Not only was he strong and worked hard, but he had a natural caring way with people, putting them at their ease, and going out of his way to serve their needs. During term time Child would work in the store evenings and on Saturday.
Here’s an indicator of the nature of the community: on many Saturday’s RC and Child would go off to the local baseball game, leaving a message on the open door “Gone to the ballgame…Come in and look around” (Benedict, Jeff (2009) How to build a business Warren Buffett would buy: the R.C. Willey story).
Trouble
In spring 1954 RC felt discomfort in his stomach.  Thinking he had ulcers brought on by the stress of coping with annual revenue of $250,000 with only him and Lamar Sessions as full-timers, after first trying to soldier on, he announced that he really needed a vacation to get rid of the ulcer.  He booked two weeks in California and asked Sessions to keep the business going while he was away. At first Session protested there would be too much for him to do, but something RC said stunned him, “You know, Lamar, when you think you’re going to die, you’ll do most anything to prolong your life.”
Around that time Child was offered a secure job as a teacher in Syracuse junior high. All he had to do was sign the school contract and his work life was set.  On Child’s graduation day (June 1, 1954) RC went to Bill and Darline’s house to explain his need for a vacation, and handed the keys to the store to Bill, asking him to oversee it while he was away.
Ominously, RC and Helen returned a week early because he was feeling too ill to continue.  Then the bad news: he was diagnosed with pancreatic cancer and was unlikely to leave the hospital.
Bill Child faced a dilemma. On the one hand he could take up the teaching contract he had always wanted. On the other, there was a business that really needed him, a business that supported the family.  The store had obligations to customers, suppliers and to Sessions. Perhaps the head teacher would allow him time to get the business on the right path and then he could come to the classroom?
But there was more bad news to come. First the tax man arrived at the store to conduct an audit. The 22-year old Bill hadn’t a clue as to what was happening at first. It turned out the outside accountant had not been making any tax payments, for years. Over $10,000 was due.
Then the bank called and told him to stop writing checks at once; there weren’t funds to cover them.
Then RC died on 3rd September.
After the funeral, the bank manager called a meeting with Bill and Helen to explain just how bad the finances of the business were. RC had borrowed $9,000 and the unpaid interest was mounting up. In addition, the bank had been financing credit given to customers. That finance was guaranteed by the business. It turned out that two-thirds were behind on their payments. Of those, one-half had failed to pay anything in nine months.  For a business with a turnover of $250,000 and $150,000 on credit that is a lot of money to have outstanding.  The bank manager wanted the store to immediately repurchase $50,000 of delinquent accounts.
The bank clearly had little faith in a 22-year old business ingénue with teaching ambitions. “Helen” the banker said, “you need to sell the business and let Bill go teach school.”
They agreed the family needed a little time to discuss what to do. Bill had only taken on the task of running the business for what he had assumed would be a short period and he had the school job lined up. Why not just sell up? But, because of all the debt, it was unlikely it would fetch a good price. Furthermore, RC had not saved any money for Helen. As profits came in he would spend it freely on his family and would give it away to needy people he met. If the business were to close his widow would have little on which to live, and no one in the family could support her. He had to turn the business around. Given the enormous goodwill it had built up over the years it still had potential.
The accidental businessman
Bill Child spoke with the school princi………………To read more subscribe to my premium newsletter Deep Value Shares – click here http://newsletters.advfn.com/deepvalueshares/subscribe-1

​I've been looking for investment lessons for today's investors in the analysis and approach Warren Buffett took when buying the shares in the dominant furniture and appliance retail chain in Utah. When Buffett bought it for Berkshire Hathaway, R.C. Willey commanded one-half of all furniture sales in Utah and one-third of all electrical goods sales. It has since gone on to dominate furniture and electrical goods retailing in a number of other states.
The R.C. Willey story is one of mid-western values of hard work, decency, business-smarts and devotion to community leading to outstanding success.  It is the story of three men who epitomised those values: Rufus Call Willey, Bill Child and, of course, Warren Buffett.
Rufus Call (or RC) Willey sold electrical appliances in 1932 from the back of a pick-up truck in the area north of Salt Lake City, Utah. A consummate salesman he had an amazing ability to engage with people, often to sell them things they thought they didn’t need. When people in the farming communities around his home town of Syracuse said they could not afford a refrigerator he would gently suggest that they just try it for a week without charge, “and if you don’t want it after a week I’ll come back and take it out – no obligation”.  Naturally, once they experienced the benefits they generally found the money from somewhere.
When competitors complained to manufacturers that RC had a competitive advantage in avoiding the overheads of a store, and therefore they should stop supplying him, RC simply built a simple 600 square foot cinder block store next to his house and stocked it with fridges, stoves and other appliances.
His 22-year old son-in-law, Bill Child, helped out in the store evenings and Saturdays when he wasn’t studying at the University of Utah in preparation to take up a teaching position in Syracuse.
When RC died suddenly in 1954 the responsibility for the tiny store landed in Bill Child’s lap.  While it had a tremendous reputation with customers there was pile of debts and it was touch and go as to whether it could survive.
With tremendous resolve, ingenuity and a family pulling together, it got through. Over time, extensions were added to the single storey building.  Low prices and great customer service drew customers back time and again despite being located down a side road. Then a second store was added. Eventually there were six, all in Utah. By 1995 annual revenue was over $250m, profits and return on capital was great and there was little debt.
Bill Child, at 63, looked to secure the future of the enterprise beyond his tenure as CEO.  Remembering that RC had died at a much younger age, he was concerned that his own death might result in enormous taxes to be paid which the family would only be able to afford by selling a large portion of their shares. A much better solution was to swap those R.C. Willey shares for Berkshire Hathaway shares.  Not only would the tax burden be better managed, but the team and its unique ethos would be preserved.
Warren Buffett could see the values he most admired lodged in Child. He wrote, “Bill Child represents the best of America. In matters of family, philanthropy, business, or just plain citizenship, anyone who follows in his footsteps is heading true north…By doing the right things for his customers and associates, he eventually left once-strong competitors in the dust…He just applied the oldest and soundest principle ever set forth: Treat the other fellow as you would like to be treated yourself” (Warren Buffett’s foreword to Benedict, Jeff (2009) How to build a business Warren Buffett would buy: the R.C. Willey story).
Buffett advises us to examine the lessons from Child’s life and apply them to our own, to lead a happier, more productive life. This short series of newsletters describes those lessons and values, and why Buffett was more than willing to pay $175m for the company.
Rufus Call Willey
Rufus Call, born in 1900 in Syracuse, 25 north of………………To read more subscribe to my premium newsletter Deep Value Shares – click here http://newsletters.advfn.com/deepvalueshares/subscribe-1

McCarthy and Stone (LSE:MCS) built its first owner-occupied retirement development in Milton Keynes in 1977. Five years later it joined the Unlisted Securities Market and two years after that obtained a full listing on the LSE. In 1988 it sold 2,596 apartments, more than it did in 2019.
In 2006 it delisted after being taken over by a consortium led by HBOS.  Just before the Great Recession it completed 2,327 apartments (FY 2007). Over the next two years UK house prices declined by 20%, with completion volumes down 50%. It was thus difficult to persuade retirees to sell up and by a MCS apartment. And this was at a time when the company carried £900m of debt.
Despite cash saving measures such as reducing land buying, suspending construction, reducing the workforce from 1200 to 500 and renegotiating terms for land to be acquired it was unable to service the debt.
In 2009 the debtholders swapped some of their loans for all the shares in a new corporate entity which took all of MCS’s assets.
In 2015 MCS re-floated on the stock market with a £200m revolving credit facility in place after raising £76m from selling some shares. Market capitalisation was over £1.5bn (compared with £425m today).
Between 2015 and 2017 the chosen strategy was to go for extraordinary growth in the number of units produced and sold. The directors aimed to double to 3,000 apartments per twelve months and to get to a 25% return on capital employed. They never achieved either target. But they did raise costs while trying.
Return on capital employed was a very impressive 20% in 2015. In 2018 it was a less impressive 10%.
At the time of the 2015 flotation and through to 2017 the company concentrated on building for sale.  It did not go in for building to rent, nor did it regard the management of the completed development and care services as a profit centre (there was an arrangement with a non-profit organisation for much of the care).
Today the main part of the business is to build and sell. But MCS is growing other sources of income, as the directors set out in the 2018 Report: “we will...aim to leverage our longer term strategic opportunities within our services and product offering. We will aim to create even deeper and longer relationships with customers to increase our customer appeal, diversify our revenue streams and reduce our exposure to market cyclicality. The long-term aim will be to create retirement communities that enrich the quality of life for our customers and their families and to become the UK’s leading developer, manager and owner of retirement communities.”
Management Services look after over 20,000 customers in 434 developments. MCS has a target of generating more than 5% of revenue from Management Services.
Typical service charges:

• Retirement Living: 1 bed £45pw, 2 bed £68pw
• Retirement Living PLUS: 1 bed £125pw, 2 bed £164pw (includes staffing costs, domestic support package, table service at community restaurant)

Building to rent
The rental side of the business was re-emphasised in July by John Tonkiss, CEO, in the 2020 interim report: “we will continue to focus on our long-term strategy to transition to a service-led organisation, offering a choice of tenures and a range of services – a strategy we know is the right one and which has supported our homeowners during this difficult time. We remain particularly excited about our rental offering in terms of its benefits to customers and increased attractiveness to investors.”
There are already over 200 rented apartments valued at £50m or so, generating a 6.5% yield. There are also 25 rent-to-buy and a score of part-rent-part-buy units.
Ground rents
MCS make a lot of money – up to £30m in a year – by selling the future ground rents paid by apartment holders. These are typically £400 - £500 pa per apartment fixed for 15 years. Increases are at 15-year intervals linked to the RPI, or, if greater, 2% pa. Leases are for 999 years.
The excuse that MCS make (and has been accepted by the government) is that the ground rents pay for the construction costs of unsellable communal areas, which usually account for 30% of the development space. Grounds rents are typically sold for £0.6m per development.
MCS remain the “head landlord” and “head leaseholder” even after the freehold is sold. This makes for continuity for homeowners ensuring they don’t have to deal with the third parties (e.g. pension funds) buying the ground rents.
………………To read more subscribe to my premium newsletter Deep Value Shares – click here http://newsletters.advfn.com/deepvalueshares/subscribe-1

My last newsletter explained that McCarthy and Stone (LSE:MCS) was valued by Mr Market at less than net current asset value (I bought at 72p last week). The main reason for the plunging share price is fear among investors that MCS will, for months or years, not be able to sell its apartments.  At any one time it has finished or currently in construction 1,500 – 2,500 apartments.   It relies on retired customers being able to sell their old family homes in an property market.  For a while Covid-19 restriction meant people had difficulty selling to finance the purchase of a MCS place. Perhaps the property market will freeze again and MCS will run out of money before recovery comes.

It has to be acknowledged that it won’t be easy to shift apartments over the next year or so, but the question for today is whether that difficulty is likely to be terminal for the business.  We can start the analysis by looking at profits and cash flow
Profit and loss, 2016 – 2020
£m 2016 2017 2018 14 months 2019 H1 to end April 2020
Turnover 636 661 672 725 101
Cost of sales -500 -530 -567 -620 -109
Gross profit 136 131 105 105 -8
Other income 9 9 11 21 ?
Administration expenses -45 -39 -44 -64 -85
Other operating expenses -5 -7 -8 -14 ?
Operating profit 95 94 64 48 -89
JVs and interest -2 -2 -5 -5 -2
Profit before tax 93 92 58 43 -91
Tax -19 -18 -12 -9 17
Profit after tax 74 74 47 35 -75
           
Earnings per share 13.9p 13.8p 8.6p 6.5p -4.1p
Dividends per share 4.5p 5.4p 5.4p 5.4p 0
Apartment average sales price £000s 259 273 300 308 297(rounding to the nearest million causes some inconsistencies in additions. H1 2020 EPS is underlying – ignoring brand write-off)
Observations
Turnover is generally around £650m to £700m over 12-month periods, which represents sales of around 2,200 apartments.  However, during the six months to 30th April sales more than halved due to lockdown. And the impact of the crisis on the second half is expected to be much greater.  But the current mini-boom in the housing market might help with that.
Even before Covid-19, gross profit margin fell from 21% in 2016 to 14% in 2019. This was mainly due to a poor strategy of rapid expansion exacerbated by the economic malaise after the EU referendum. The strategy was changed in 2018 to concentrate on return on capital employed rather than revenue growth.
As well as the “cost of sales” increases the administration expense line shows the penalty paid for trying to greatly raise the rate of apartment construction and sales – admin rose from £45m to £64m. Operating profit margin fell from 20% in 2015 to 7% in 2019.
In the six months to end-April true total administrative expenses amounted to £20.2m which was only slight up on the same period in 2019 (£19.5m).  The rest is exceptional items and amortisation of brand. Leaving that aside, because revenue is down so much administration expenses (underlying) as a proportion of revenue grew to 20% compared with 7% in 2019.
Operating profit, prior to Covid-19, declined from over £90m to £48m for full years.  The Covid-19 freeze in sales and a large write-off of brand value caused an operating loss in the H1 2020.  Ignoring exceptionals the operating loss would be £25m at the interim stage.
Dividends have been stopped as one of managers cash conservation measures – see later for other measures.
Profit after tax and earnings per share halved before Covid-19. But the 2018’s strategic change should address that – see below.
The average sold price for an apartment fell in the six months to the end of April 2020 by about 3%. Most of that period was unaffected by Covid-19, so I deduce that the price falls were pretty large in the spring.
Overall impression: This company had a £387m market capitalisation when I bought in last week. It has demonstrated an ability to produce annual earnings of over £70m after-tax, but profits were headed in the wrong direction even before Covid.
Now that Covid is here managers have rejigged so that cash burn is down to about £7m per month.
Strategic change
When MCS floated on the stock market in 2015 the prospectus stated that managers intended to raise the number of apartments constructed and sold from around 1,500 per year to 3,000 per year. And they were going to do this within a four-year timeframe.
It turned out they were wildly ambitious.  They increased costs, strained the organisation and cut corners. And even then, found they could only raise annual sales to 2,302 (the best year was 2017). The chairman and CEO leading that strategy have now gone.
The new team announced in 2018 that their emphasis would be to “shift away from volume towards buying quality land with margin enhancing potential as opposed to being focused on quantity of sites [and] to actively manage our land bank to less than 4 years supply to meet our new steady state volume targets of c.2,100 units per annum…a shift in business mindset … to increasing ROCE and margins…rightsizing the operational cost base…Focus on build cost reduction and developing a more efficient sales and marketing model.” (2018 Report)
The cost reduction and cash saving programme began two years ago has proved helpful in providing some protection in the 2020 downturn.
Cash flow....………………To read more subscribe to my premium newsletter Deep Value Shares – click here http://newsletters.advfn.com/deepvalueshares/subscribe-1

McCarthy & Stone’s (LSE:MCS) shares have fallen from 290p in 2016 to 72p.  The precipitous fall since March has pushed them significantly below net current asset value per share.  Furthermore, the main current assets (valued at £709m) are properties held by the company either ready for sale apartments to elderly folk, rentable assets or land with planning. Even if I allow for the possibility of a severe property recession by knocking off one-third of the balance sheet value of that property the market capitalisation of £387m is less than the net current asset value by a comfortable margin of safety.
Because most property companies are reliant on borrowed money the sector has been rejected by Mr Market.  But is there really a high risk that MCS will be unable to finance itself in a severe recession?
At first sight borrowing looks high at £198m (a revolving credit facility to March 2023, with interest at Libor + 1.6% or 1.7%). But then you look at the cash balance and see what the managerial team have done. They are prepared for a period of 2.5 years of no sales at all by building cash up to £147m. Net borrowing is only £54m.
Additional preparation comes in the form of arranged access to another £300m under the government/BoE Covid Corporate Financing Facility. MCS can sell commercial paper with a term of 12 months. Drawdown can take place any time until 23 March 2021.
Currently, cash balances are so high that they do not need to draw down the CCFF.  In fact, they probably never will because they are still selling property despite the Covid-19 restrictions.
Thus, I’m confident that with a 70% share of the independent retirement living market MCS will survive the recession.  Even better, it might find plenty of site acquisition opportunities at low prices over the next two years especially near or in town centre locations, e.g. shops up for sale.
The Business Model
MCS build and sell (with a few rented) retirement properties for communities of retirees. They have experience of constructing over 60,000 since 1977. Annual output is, in non-Covid years, over 2,000 apartments.
After the sale of apartments MCS provide management and care services. The care is not like that in a care home – MCS provide independent living in retirement with a social circle.  Care it’s much simpler than in old-people’s homes. It merely consists of things like one hour of cleaning per week, entertainment events, a bit of shopping, helping care for pets, changing bedding, safety cameras, 24-hour emergency cover and on-site restaurant meals.
MCS generally buy brownfield sites near town centres to accommodate around three to four dozen apartments on 0.5 – 3 acres. Average selling price c £300,000.
To help sales along MCS frequently (recently as much as 49% of the time) buy in part-exchange the old family home of the retiree. These are quickly sold on – the time taken………………To read more subscribe to my premium newsletter Deep Value Shares – click here http://newsletters.advfn.com/deepvalueshares/subscribe-1
 

It was seven years ago that I left a tenured professorship to concentrate on investment.  At the time the FTSE 100 was around 6,600. The market as a whole has not exactly moved in a positive direction over those seven years (although there have been dividends of around 3-4% per year).
Given the headwinds I suppose I can be reasonably pleased with my performance so far, especially in light of the fact that my approach – deep value – generally has not done well in an era of great excitement about growth companies. I remain convinced that value investing will have many years in the future when it out-performs growth investing across the market, giving a nice tailwind to help future portfolios along.
Even without a boost from rising indices, a deep value strategy can perform well, as the tables below show.  These are results (so far) of all the shares bought for the portfolios I’ve been writing about in my Newsletters.
The comments I made at the time explaining the rationale for each investment are available for you to read in older newsletters - there is nowhere for me to hide from my appraisals made three, four or seven years ago.
I present the returns after taking the hit on broker costs, stamp duty and bid/offer spread.
(Some of you have joined us recently so, in case you are not familiar with them, I briefly describe the criteria for my portfolios following the portfolio performance tables.)
The 2013 NCAV portfolio
 CompanyPurchase date Purchase price Divs to 30 September 2020 Price 30 September 2020 Return to 30 September 2020
French Con.25.7.13 £0.3047 zero Sold July 2015 £0.4378 44%
Caledonian T25.7.13 £0.70 zero Sold April 2020 for £1.391 99%
Fletcher King6.8.13 £0.30 14.25p Sold June 2016 for 46p 101%
Northamber22.8.13 £0.287 1.6p Sold Oct 2016 £0.303 11%
Titon5.9.13 £0.379 6.5p Sold May 2016 £1.06 197%
Mallett12.11.13 £0.7682 12.7p Sold Nov 2014 £0.60 -5%
AVERAGE             75%The 2014 NCAV portfolio
CompanyPurchase date Purchase price Divs to 30 September 2020 Price 30 September 2020 Return to 30 September 2020
Holders Tech10.10.14 & 3.11.14 £0.47 1p Sold March 2017 £0.33 -28%
Airea4.11.14 £0.1195 0.9p Sold Sept 2016 £0.309 166%
Northamber17.11.14 £0.4265 0.7p Sold Oct 2016 £0.303 -27%
Caledonian T30.12.14 £1.39 zero Sold April 2020 for £1.391 0
AVERAGE        28%The 2015 NCAV portfolio
 CompanyPurchase date Purchase price Divs to 30 September 2020 Price 30 September 2020 Return to 30 September 2020
PV Crystalox15.1.15 £0.122 zero Sold Dec 2016 £0.237 94%
Arden Partners1.9.15 £0.422 1p Sold May 2018 £0.364 -11%
Northamber4.9.15 £0.443 0.4p Sold Dec 2016 £0.303 -31%
AVERAGE        17%The Buffett-style portfolio
This type of share is rarer than the others, and so I combine all years.
CompanyPurchase date Purchase price Divs to 30 September 2020 Price 30 September 2020 Return to 30 September 2020
 Dewhurst9.4.14 £3.18 70.5p Sold February 2020 £7.217 149%
MS International9.10.19 £1.723 3.5p £1.05 -37%
Character20.1.20 & 5.6.20 £2.811 15p £3.16 18%
AVERAGE        43%(I bought some more of Dewhurst in June 2014 at £3.11, December 2014 at £3.75, November 2017 at £5.46, February 2019 at £5.54 and April 2019 at £5.64.).
Modified price earnings ratio portfolio 2015/16
CompanyPurchase date Purchase price Divs to 30 September 2020 Price 30 September 2020 Return to 30 September 2020
Haynes11.2.15 £1.159 33.5p Sold 2.10.19 £2.9175 181%
AGA11.3.15 £1.002 zero Taken over June 2015 £1.456 45%
Hogg Robinson10.4.15 £0.4709 2.37p Sold June 2016 £0.656 44%
MS International3.7.15 £1.86 36p £1.05 -24%
BHP Billiton24.9.15 £10.43 127p Sold May 2018 £16.90 74%
TClarke5.11.15 £0.7916 13.61p Sold Feb 2020 £1.1215 59%
Premier Farnell8.4.16 £1.222 3.6p Taken over 20.6.16  £1.632 36%
AVERAGE        59%The AGA holding was doubled 30 April 2015 at a price of £0.9466.
Modified price earnings ratio portfolio 2017
CompanyPurchase date Purchase price Divs to 30 September 2020 Price 30 September 2020 Return to 30 September 2020
Braemar28.6.17 £2.848 20p Sold June 2018
£2.639
 0%
Caffyns10.8.17 £5.012 52.5p Sold 17 July 2020 £2.389 -42%
Connect27.9.17 £1.046 10.8p £0.185 -72%
MS Intern14.11.17 £1.84 20p………………To read more subscribe to my premium newsletter Deep Value Shares – click here http://newsletters.advfn.com/deepvalueshares/subscribe-1

The seller of Helzberg Diamonds, Barnett Helzberg was very pleased that it found a home within the Berkshire Hathaway family. He was able to step back from the business and devote more time to his family and philanthropic pursuits. The family were diversified now with a large holding in Berkshire which gained income from a broad spread of business sectors; and they could sell the highly liquid Berkshire shares at any time to diversify further.
Most importantly, the future of the company was in good hands. There was a solemn commitment from Buffett and Munger to continue the firm’s business philosophy, to retain the current associates and to maintain the corporate HQ in the Kansas City area.
Jeff Comment, CEO, expected his new boss to give him some instructions. Buffett did indeed ring him up the day after the sale (May 1, 1995), but all he said was “Guess what you get to do today. Start breaking all your banking relationships, because from now on I’m your bank.” (Jeff Comment in an interview with Robert P. Miles in The Warren Buffett CEO (2002) John Wiley).
Thus Buffett required control of capital allocation across the group. But apart from that, Comment was free to manage the business how he thought best “Berkshire hasn’t asked me to do anything that’s really changed the business”.
He told the Kansas City Star paper that Buffett had said that he doesn’t call his presidents but “I like hearing from you guys once in a while.”
Jeff Comment says that Buffett and he are very different people, but they really trust one another, and have a high degree of mutual respect. He thinks that is the case with all of Buffett managers, there is a sort of chemistry.  “That chemistry is missing in a lot of businesses today. They’re functional, they’re tactically correct, but boy do you lose the passion, and you lose the love of the business. That doesn’t happen here…Warren is an incredibly cordial, warm, personable person.” (Bob Miles's book)
Why not put Borsheims and Helzberg together?
Most business groups already holding a jewellery retailer then adding another would instinctively look for “synergy”, such as buying economies or rationalising the store estate. They would put them under the same management.  But Berkshire is no ordinary group.
First, Buffett had promised that the businesses would be largely autonomous, each with their distinctive cultures and leaderships.
Second the synergistic gains would be pretty small compared with the loss of focus, damage to the esprit de corps and confusion over strategy. On the latter point Buffett wrote in his 1995 letter that “Helzberg's…is an entirely different sort of operation from Borsheim's, our Omaha jewellery business, and the two companies will operate independently of each other.”
He expanded on that thought in at the Meeting in May 1996, “Both [Borsheims and Nebraska Furniture Mart] offer this incredible selection, low prices brought about by huge volume, low operating costs, and all of that. Operating multiple locations…you would lose something, in terms of the amount of selection that could be offered. There’s $50 million-plus at retail of jewellery at Borsheims’ one location. Well, when someone wants to buy a ring, or a pearl necklace, or something of the sort, they can see more offerings at a place like that than they possibly could at somebody who i………………To read more subscribe to my premium newsletter Deep Value Shares – click here http://newsletters.advfn.com/deepvalueshares/subscribe-1