🧵 In 1952, Buffett invested in Cleveland Worsted Mills, attracted by its low valuation and high dividend yield.
📉 The company unexpectedly cut its dividend, leading Buffett to investigate the situation.
💸 Cleveland Worsted Mills announced a liquidation plan in 1955, distributing $18.5 per share to shareholders by 1957.
📈 Despite the initial setback, shareholders who held until liquidation achieved a 21% internal rate of return.
@adriarivero:
“In 1952, Buffett saw a clear opportunity in Cleveland. The stock was trading in a range of $84 to $90 per share, while the net current asset value of the company was $9 per share, and its tangible book value was $184. However, shortly after investing in Cleveland, Buffett faced an unexpected setback. Despite his analysis, the company cut the dividend from $8 to $4 per share. The company’s problems culminated in 1955 when the president of Cleveland announced a liquidation plan. By 1957, the company distributed $18.5 per share as a result of the sale of its assets. Therefore, for those shareholders who bought shares in 1952 at a price of around $92 and held them until the liquidation of the assets, the return was very good, with an internal rate of return of 21%.”
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