A Safe Bargain for 70 Cents on the Dollar

I talk a lot about compounders–businesses that produce lots of cash flow and have opportunities to reinvest that cash flow at high rates of return. Such businesses that produce high returns on capital can compound their intrinsic value at above average rates over time, and the stock price follows intrinsic value over the long haul.

But while I spend time reading and researching great businesses, occasionally I come across an opportunity to buy a bargain–a stock trading for less than the value to a private owner. Sometimes these opportunities are created through special situations such as a spinoff.

Associated Capital (AC) is an example of this type of bargain. It trades for less than the net cash on its...