July 10, 2008: A CEF Warhorse: Adams Express

In the present era of micro-second computer program trading with the minute-by-minute explosions and implosions of worth,how many CEFs claim a history of over one hundred and fifty years? Adams Express (ADX) has thrived since 1854. The first seventy-five years or thereabouts, Adams Express was the nation's leading independent express company. That's stagecoach and the galloping mailman era, folks. The founder, Alvin Adams, actually began transport early in 1837 along the New England coastal areas and the hinterlands of New York State, then slightly beyond into Indian Territory. A financial panic all but wiped out his initial effort, but Mr. Adams persevered By 1850, Adams Express was thriving and expanding. A division of the Adams Express Company was serving the needs of the California Gold Rush down to South America. In 1861, the company, of necessity, split off into Adams Express and the Southern Express Company. Rumor was that they never split, as Southern Express Stock was never traded. They maintained joint offices at common points. Adams was accused of owning both companies, but nothing bad came of it. It was a true American success story, during which time the shareholders and other partners profited in equal share with the owner, more or less.

After the Civil War, ADX held a strong grip on shipping throughout the country. In 1910, it was the second largest shareholder of the Pennsylvania Railroad and the third largest of the New Haven Railroad, besides owning large blocks of stock in American Express, Norfolk and Western Railroad and many other blue chip industrial age behemoths of early 20th century American industry and transportation. A little 1920s Warren Buffett?

Allan Pinkerton, the famous detective, solved robbery issues for Adams Express common in the old west and rural areas without being hindered by Trial Lawyers. Adams Express funded his company, the Pinkerton National Detective Agency.

Adams Express amalgamated its corporate existence out of the transportation business into a closed-end investment trust for wealthy individuals in 1929 - not the best time to create a trust. Nonetheless, it has survived quite well to date. ADX has paid a dividend every year since 1936.

Where does that leave Adams Express now? This CEF is trading at a substantial discount to net asset value. Priced at $11.45 per share, ADX has about $984m in assets and trades about 125g shares per day, making it liquid. Expenses are low, averaging about 0.44%. Over many years, ADX has had lackluster performance. I believe that with the present holdings, a bounce back from the bear market will enhance this quite well diversified portfolio.

Top holdings include Petroleum and Resources (PEO) - loosely affiliated with Adams Express sharing the same office space in Baltimore, MD.,General Electric, Microsoft, Schlumberger, Bank of America, Pepsi, Proctor and Gamble, Pfizer, Conoco Phillips and AIG. Recent additions to a portfolio which has a miserly turnover rate of about 10% in an active year include Halliburton, Chevron and Hansen Natural. ADX repurchased over one million sixty-three thousand shares during the first six months of this year.

I owned this CEF many years ago, and am considering purchase again when market conditions improve. If nothing else, ADX is a fascinating conversation piece that may serve to enhance a niche portion of your portfolio.