Henry Singleton is one of the investment world's most overlooked individuals. Singleton was similar to Warren Buffett in many ways, building a business from the ground up into a global conglomerate and cash machine that generated huge returns for his investors.
Unlike Buffett, Singleton didn't start his career investing in value stocks. He started out as an engineer and during World War II developed a system for removing the magnetic field from ships so they could not be detected by enemy submarines.
Singleton's investing career began in the early 1960s when he was in his mid-40s, and he quickly made up for lost time. After buying struggling electronics company Teledyne (TDY, Financial), Singleton turned the company into a leading U.S. conglomerate. Teledyne achieved EPS growth of 1,200% in only 10 years and return on equity exceeded 30%. An investor who put money into Teledyne stock in 1966 achieved an annual return of 17.9% over 25 years, or a 53x return on invested capital vs. 6.7x for the Standard & Poor's 500, 9.0x for GE and 7.1x for other comparable conglomerates. At its peak, Teledyne had revenue of nearly $5 billion.
Singleton used Mr. Market to build his business, issuing stock at the top of the market to fund acquisitions and then using the cash these companies generated to buy back the majority of Teledyne's outstanding shares over several decades.
"Buffett considers that Henry Singleton of Teledyne has the best operating and capital deployment record in American business.
"All four major industry groups in Teledyne are in fully competitive areas; none has a special protected niche; and yet all four earn 50% on assets. The company earns $250 million aftertax with very conservative accounting.
"Henry Singleton bought 130 businesses for 'Chinese paper,' as it used to be called, when his stock was riding high. Then when the market and his stock fell he reversed field and the last eight years hasn’t acquired a single company; on the contrary, by buying his stock back he has shrunk his capital from 40 million shares to 12 million.
"According to Buffett, if one took the top 100 business school graduates and made a composite of their triumphs, their record would not be as good as that of Singleton, who incidentally was trained as a scientist, not an MBA."
Here are some of the best quotes from and about this ledgendary investor even Buffett considers one of the best of all time.
“He understood how to move between real assets and financial assets in a way you don’t see today. He was the most brilliant industrialist that I’ve ever met, and I’ve met many.” –Â Leon G. Cooperman speaking about Henry Singleton
“Our quarterly earnings will jiggle.”
“All new projects should return at least 20% on total assets.”
“A steel company might think it is competing with other steel companies. But we are competing with all other companies.”
“After we acquired a number of businesses we reflected on aspects of business. Our conclusion was that the key was cash flow."
“There are tremendous values in the stock market but in buying stocks, not entire companies. Buying companies tends to raise the purchase price too high.”
“It’s good to buy a large company with fine businesses when the price is beaten down over worry."
“I don’t believe all this nonsense about market timing.”
“My only plan is to keep coming to work every day. I like to steer the boat each day rather than plan ahead way into the future.”
“I know a lot of people have very strong and definite plans that they’ve worked out on all kinds of things, but we’re subject to a tremendous number of outside influences and the vast majority of them cannot be predicted. So my idea is to stay flexible.”
Disclosure:Â The author owns no stock mentioned.