Capital Southwest Corporation is a small business investment company that is taxed as an investment fund and regulated as a closed end non-diversified investment company. It is based in Dallas, Texas and trades on the NASDAQ under the symbol CSWC. They have been in business since 1961.
CSWC lives up to its motto: "Patient Capital for Exceptional Businesses". They are long term investors and have done very well at it. As of March 31, 2012 CSWC had total assets of $632,989,000 with only minor liabilities of $4,283,000. It had investments valued at $558,546,000 with unrealized appreciation of $469,553,000. They have done very well.
In spite of this CSWC is cheap. On March 31, 2012, it had a book value of $167.45 and the stock had closed at $94.55. Even today, June 27, 2012, the stock is only at $103. Please note that the investments are concentrated and there is substantial potential long term gains liability, should any be sold or liquidated.
Performance has been as follows:
|1 year||5 years||10 years|
|S & P 500 Index||8.5%||2.0%||4.1%|
CSWC's 12 largest investments, which constitute 94.7% of its investment portfolio, look like this:
|Rector Seal||$ 52,600||$166,300,000|
|Alamo Group||$ 5,800,000||$121,458,210|
|Whitmore Manufacturing||$ 2,190,937||$ 85,138,938|
|Heelys||$ 102,490||$ 67,200,000|
|Media Recovery||$ 5,415,000||$ 18,700,000|
|Hologic||$ 220,000||$ 13,637,271|
|Extreme International||$ 3,325,875||$ 10,162,000|
|Trax Holdings||$ 8,200,000||$ 9,800,000|
|Cinatra Clean Technologies||$13,563,842||$ 6,002,348|
|CapStar Holdings||$ 3,703,619||$ 5,338,000|
|iMemories||$ 5,078,479||$ 5,078,479|
Needless to say, their early successes were astounding and there is no guaranty they will ever come remotely close to that kind of performance. I like their philosophy of patience and think they are well run. They continue to make new investments and seem to know what they are doing.
Again, as always, never put all your eggs in one basket. CSWC is worthy of having some of your money. It is a good shot and worth the chance.
Disclosure: I am long CSWC.