NPORT-EX 2 cet-nportex.htm SCHEDULE OF INVESTMENTS

CENTRAL SECURITIES CORPORATION

 STATEMENT OF INVESTMENTS

March 31, 2020

(unaudited)

 

          
Shares     Value 
   COMMON STOCKS 91.6%     
   Banks 3.8%     
255,000   Citigroup Inc.  $10,740,600 
230,000   JPMorgan Chase & Co.   20,706,900 
        31,447,500 
          
   Communications Services 4.7%     
18,000   Alphabet Inc. Class A (a)   20,915,100 
185,000   Cogent Communications Holdings, Inc.   15,164,450 
200,000   Liberty Latin America Ltd. Class C (a)   2,052,000 
        38,131,550 
          
   Consumer Services 0.2%     
30,000   Wynn Resorts Ltd.   1,805,700 
          
   Diversified Financial 8.6%     
180,000   American Express Company   15,409,800 
400,000   The Bank of New York Mellon Corporation   13,472,000 
40   Berkshire Hathaway Inc. Class A (a)   10,880,000 
330,000   Capital One Financial Corporation   16,638,600 
405,000   The Charles Schwab Corporation   13,616,100 
        70,016,500 
          
   Diversified Industrial 4.9%     
250,000   Brady Corporation Class A   11,282,500 
680,000   Heritage-Crystal Clean, Inc. (a)   11,043,200 
56,000   Roper Technologies, Inc.   17,461,360 
        39,787,060 
          
   Energy 2.9%     
700,000   Hess Corporation   23,310,000 
          
   Health Care 7.0%     
90,000   Johnson & Johnson   11,801,700 
195,000   Medtronic plc.   17,585,100 
200,000   Merck & Co., Inc.   15,388,000 
300,000   Roche Holding AG ADR   12,171,000 
        56,945,800 
          
   Insurance 28.8%     
90,000   Kinsale Capital Group, Inc.   9,407,700 
28,424   The Plymouth Rock Company Class A (b)(c)   198,968,000 
350,000   Progressive Corporation   25,844,000 
        234,219,700 

 

Shares     Value 
   Real Estate and Homebuilding 2.9%     
900,000   Rayonier Inc.  $21,195,000 
270,000   TRI Pointe Group, Inc. (a)   2,367,900 
        23,562,900 
          
   Retailing 3.1%     
13,000   Amazon.com, Inc. (a)   25,346,360 
          
   Semiconductor 11.0%     
450,000   Analog Devices, Inc.   40,342,500 
166,615   Cree, Inc. (a)   5,908,168 
800,000   Intel Corporation   43,296,000 
        89,546,668 
          
   Software and Services 1.7%     
90,000   Microsoft Corporation   14,193,900 
          
   Technology Hardware and Equipment 11.3%     
350,000   Coherent, Inc. (a)   37,243,500 
225,000   Keysight Technologies, Inc. (a)   18,828,000 
245,000   Motorola Solutions, Inc.   32,565,400 
1,077,488   Ribbon Communications Inc. (a)   3,264,789 
        91,901,689 
          
   Utilities 0.7%     
730,000   Star Group, L.P.   5,621,000 
          
    Total Common Stocks (cost $331,067,050)   745,836,327 
          
SHORT-TERM INVESTMENTS 8.3%
          
   Money Market Fund 7.1%     
57,418,970   Fidelity Investments Money Market Fund      
    Treasury Only Portfolio Class I   57,418,970 

 

Principal         
   U.S. Treasury Bills 1.2%     
$ 10,000,000   U.S. Treasury Bill 0.05%, due 9/24/2020 (d)   9,997,751 
          
    Total Short-Term Investments (cost $67,416,721)   67,416,721 
          
    Total Investments (cost $398,483,771) (99.9%)   813,253,048 
          
    Cash, receivables and other assets less liabilities (0.1%)   710,185 
          
    Net Assets (100%)  $813,963,233 

 

 

(a) Non-dividend paying.

(b) Affiliate as defined in the Investment Company Act of 1940 and restricted. See Note 3 and Note 4.

(c) Valued based on Level 3 inputs. See Note 2.

(d) Valued based on Level 2 inputs. See Note 2.

 

See accompanying notes to statement of investments.

 

 

 

CENTRAL SECURITIES CORPORATION

NOTES TO STATEMENT OF INVESTMENTS

(unaudited) 

 

1. Security Valuation – Marketable common stocks are valued at the last or closing sale price or, if unavailable, at the closing bid price. Investments in money market funds are valued at net asset value per share. Other short-term investments are valued at amortized cost, which approximates fair value. Securities for which no ready market exists are valued at estimated fair value pursuant to procedures adopted by the Board of Directors. The determination of fair value involves subjective judgments. As a result, using fair value to price a security may result in a price materially different from the price used by other investors or the price that may be realized upon the actual sale of the security.

 

As of March 31, 2020, the tax cost of investments was $398,483,771. Net unrealized appreciation was $414,769,277 consisting of gross unrealized appreciation and gross unrealized depreciation of $448,856,094 and $34,086,817, respectively.

 

2. Fair Value Measurements – The Corporation’s investments are categorized below in three broad hierarchical levels based on market price observability as follows:

 

●Level 1 – Quoted prices in active markets for identical investments;
●Level 2 – Other significant observable inputs obtained from independent sources, for example, quoted prices in active markets for similar investments;
●Level 3 – Significant unobservable inputs including the Corporation’s own assumptions based upon the best information available. The Corporation’s only Level 3 investment is The Plymouth Rock Company, Inc. Class A Common Stock (“Plymouth Rock”).

 

The designated Level for a security is not necessarily an indication of the risk associated with investing in that security.

 

The Corporation’s investments as of March 31, 2020 are classified as follows:

                 
   Level 1   Level 2   Level 3   Total 
Common stocks  $546,868,327   $—   $198,968,000   $745,836,327 
Short-term investments   57,418,970    9,997,751    —    67,416,721 
Total investments  $604,287,297   $9,997,751   $198,968,000   $813,253,048 

 

The following is a reconciliation of the change in the value of Level 3 investments:

 

Balance at December 31, 2019  $216,022,400 
Change in net unrealized appreciation of investments in affiliated companies included in net decrease in net assets resulting from operations   (17,054,400)
Balance at March 31, 2020  $198,968,000 

 

Unrealized appreciation of Level 3 investments held as of March 31, 2020 decreased by $17,054,400 during the three months ended March 31, 2020, which is included in the above table.

 

In valuing the Plymouth Rock Level 3 investment as of March 31, 2020, management considered Plymouth Rock’s financial condition and results of operations, the insurance industry outlook, and any transactions in Plymouth Rock’s shares. Management used significant unobservable inputs to develop a range of values for the investment. It used a comparable company approach that utilized the following valuation multiples from selected publicly traded companies: price-to-book value (range: 0.7–1.4; average: 1.0); price-to-historical earnings (range: 6.8–28.6; average: 18.3); and price-to-forward earnings estimates (range: 8.1–22.7; average: 14.1). Management also used a discounted cash flow model based on a forecasted return on equity of approximately 10% and a cost of capital of approximately 9%. Plymouth Rock’s book value and an independent valuation of Plymouth Rock’s shares obtained by Plymouth Rock were also considered. Averages of these values were then discounted for lack of marketability and control of the Plymouth Rock shares by 30% and 40%, a range management believes market participants would apply. Management presented and discussed the above information with the Corporation’s directors, who selected the value for the investment.

 

 

 

Significant increases (decreases) in the price-to-book value multiple, price-to-historical earnings multiple, price-to-forward earnings estimate multiple, return on equity rate and book value in isolation would have resulted in a higher (lower) range of fair values. Significant increases (decreases) in the discount for lack of marketability or cost of capital in isolation would have resulted in a lower (higher) range of fair values.

 

Effective January 1, 2020, the Corporation adopted Accounting Standards Update 2018-13, “Fair Value Measurement (Topic 820) — Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU 2018-13”), which introduces new fair value disclosure requirements as well as eliminates and modifies certain existing fair value disclosure requirements. Management has determined that there is no material impact on the applicable financial statement disclosures as a result of the adoption of ASU 2018-13.

 

3. Restricted Securities - The Corporation may from time to time invest in securities the resale of which is restricted. On March 31, 2020, the Corporation’s only restricted security consisted of 28,424 shares of Plymouth Rock that were acquired on December 15, 1982 at a cost of $710,600. This security had a value of $198,968,000 at March 31, 2020, which was equal to 24.4% of the Corporation’s net assets. The Corporation does not have the right to demand registration of this security.

 

4. Affiliated Companies – Plymouth Rock is an affiliated company as defined in the Investment Company Act of 1940 due to the Corporation’s ownership of 5% or more of the company’s outstanding voting securities. During the three months ended March 31, 2020, unrealized appreciation from the Corporation’s investment in Plymouth Rock decreased by $17,054,400 and the Corporation received dividends of $7,081,555 from Plymouth Rock. The Chief Executive Officer of the Corporation is a director of Plymouth Rock. The President of the Corporation is a director of certain subsidiaries of Plymouth Rock.