The Union Street Railway was a stock that Warren Buffett purchased during the mid 1950’s. The lead for this stock was given to Buffett by his mentor and friend ‘The Dean of Wall Street’ Benjamin Graham.
Despite the name Union Street Railway was actually a bus company situated in New Bedford, Massachusetts. The company had around $800,000 in treasury bonds, just under $200,000 cash plus outstanding bus tickets of $96,000. This equalled to around $60 per share but the share price was trading between $30 and $35.
The company was aware of this discrepancy and was buying back its own stock. Buffett, not to be out done, placed his own advertisement in newspapers in order to buy as much stock as possible. Union Street Railway was a regulated utility and so Buffett got the largest shareholder list from the public utility commision and worked that to get extra stock.
Next Buffett wanted to meet up with management which was something Ben Graham did not do on a regular basis. At the meeting Mark Duffy, CEO, mentioned to Buffett that the company was thinking about having a return of capital distribution. Par value of the stock was $25 and the company was thinking about returning two units to shareholders!
You can see how Buffett did well in the early years. Buying a stock for $35 and receiving $50 in a capital return plus still holding the stock and having value in it.
Buffett made around $20,000 on this transaction whilst his capital was still less than $100,000.
A copy of the accounts can be seen below: