Many investors have come to know of Teledyne through Warren Buffett, who in John Train’s 1980 classic The Money Masters, declared the company’s co-founder, Henry Singleton, as having “the best operating and capital deployment record in American business”. Buffett’s seal of approval spawned a vast collection of fawning articles and books about the unconventional engineer, almost chess Grandmaster, and entrepreneur, who delivered 20.4% annualized returns for shareholders during his 26 years as CEO1. In a 2003 Grant’s Interest Rate Observer article titled Emulate Henry Singleton, Jim Grant elaborates:
Anyone who was not reading The Wall Street Journal in the 1960’s and 1970’s missed the most instructive phase of Singleton’s career. When the Teledyne share price was flying, as it was in the 1960’s, the master used it as a currency with which to make acquisitions. He made about 130. Many managements have performed this trick; Singleton, however, had another: When the cycle turned and Teledyne shares were sinking, he repurchased them. Between 1972 and 1984, he tendered eight times, reducing the share count (from high to low) by some 90 percent. Many managements have subsequently performed the share-repurchase trick, too, but few have matched the Singleton record, either in terms of market timing or fair play. Singleton repurchased stock when the price was down, not when it was up (in the 1990’s, such icons as G.E., I.B.M., AOL Time Warner, Cendant and, of course, Tyco paid up-and up). He took no options awards, according to Mr. Cooperman, and he sold not one of his own shares. Most pertinently to the current discussion of “corporate governance,” he didn’t sell when the company was buying (another popular form of managerial self-enrichment in the 1990’s).
Some were vexed that, for years on end, Teledyne paid no dividend. The master reasoned that the marginal dollar of corporate cash was more productive on the company’s books than in the shareholders’ pockets, and he was surely correct in that judgment. Teledyne’s stable of companies (many in defense-related lines, others in specialty metals, offshore drilling, insurance and finance, electronics and consumer products, including Water-Pik) generated consistently high margins and high returns on equity and on assets
While Singleton’s track record is worthy of study and praise, anyone who subscribes to this blog has certainly read The Outsiders, The Money Masters, etc. and is familiar with the man’s legendary capital allocation exploits. If not, just Google it. There is no shortage of fanboy articles. Less remarked upon is Teledyne, the company itself, and how it has fared in the post-Singleton years.
Five years after Singleton stepped down as Chairman in 1991, Teledyne, then an industrial and aerospace conglomerate focused on electronic components and systems, merged with Allegheny Corp., a manufacturer of steel and specialty metals. Three years later, as part of a major restructuring, Allegheny reversed course. Teledyne’s specialty equipment (transportable forklifts, mining equipment), fluid systems (springs, pressure control valves), and aeronautical (drones, unmanned aerial vehicles) divisions were sold. Consumer water piks were spun-off as one separate company, the remaining stew of electronics and communications systems lines spun-off as another. The latter formed the basis for what Teledyne is today.