Henry Singleton was one of the best capital allocators and Teledyne was his masterpiece. Stock buybacks were a big part of its success.
Singleton started Teledyne in 1960 but it wasn’t until 1966 when the story really begins. The year prior, it’s stock jumped from $15 to $65.
Singleton took advantage of an enthusiastic market and went on a shopping spree. By 1970, he had acquired 130 companies using Teledyne stock trading between 40x to 70x earnings. The shares outstanding quadrupled from 1965 to 1970 (mostly through acquisitions via stock, but also a 3% stock dividend — a dividend paid in shares rather than cash — paid on four of those years).
Then ’70s bear market hit. Teledyne stock tanked. It’s P/E dropped below 10.
An outsider only looking at the stock price would see a horrendous picture. An investment in Teledyne in 1966 would rise 235% by 1968, then tumble to a 40% net loss by 1974. It was a devastating round trip for anyone who hung on. Continue Reading…