A Dollar Invested With Henry Singleton in 1963 Was Worth $180 by 1990
He turned Teledyne's cash into a 20.4 percent annual gain by buying its own cheap shares, a performance Munger called utterly ridiculous.
Founders · #431 How Henry Singleton WorkedA dollar invested with Henry Singleton in 1963 was worth $180 by 1990.
Singleton was an electrical engineer who founded Teledyne, a conglomerate that owned more than 100 unrelated businesses, in the early 1960s. He ran it for almost 30 years, earning investors about 20.4 percent a year.
What set him apart was capital allocation, deciding what to do with the cash his businesses produced. He avoided dividends, ran the company to maximize cash flow rather than reported earnings, and had profits from more than 100 units sent to headquarters for him to deploy.
Mostly he bought Teledyne itself. Between 1972 and 1984, in eight tender offers, he repurchased 90 percent of its shares because, as he said, "our stock is simply too cheap."
Charlie Munger, Berkshire Hathaway vice chairman and Warren Buffett's partner, said Singleton's financial returns were "a mile higher than anyone else's" and "utterly ridiculous."
Questions people ask
What does a 20.4% compound return actually mean?
It means the investment grew by 20.4 percent per year on average, with each year's gains added to the base for the next year. At that pace, money doubles about every three and a half years. Sustained for almost three decades, that compounding turns a single dollar into more than a hundredfold gain.
What is capital allocation?
It is the CEO's job of deciding what to do with the cash a business earns. Options include reinvesting in operations, buying other companies, paying dividends, or repurchasing shares. Singleton treated it as his most important job and concentrated Teledyne's cash on its cheapest opportunity, its own stock.
Why were share buybacks unusual at the time?
In the early 1970s, buybacks were uncommon and Wall Street often read them as a sign a company lacked growth opportunities. Singleton ignored that view and bought aggressively when he thought Teledyne was cheap. He later earned the nickname the Babe Ruth of repurchases.