Buy Cheap Shells, Strip and Reload the Portfolio

“portation Management owned 50 percent of Gelco shares, which were again trading at $3. Desmarais had effective control of Gelco and became president of the company. As president and controlling shareholder, he framed and executed the company’s investment policies and controlled the treasury. He began liquidating Gelco’s investment portfolio because it had positions in many investments, but control in none, and was vulnerable to market forces and decisions of management that it could not influence.”

“The attitude Desmarais adopted in the 1960s was that the Gelco strategy entailed the simple acquisition of a company (Gelco) with an unspectacular investment portfolio that could easily be liquidated and reinvested in better-performing investments. In less polite terms, Desmarais was stripping Gelco’s assets for redeployment into more sensible directions. He did, however, ensure that other minority share¬ holders got fair treatment — good dividends, some capital growth — while he pursued his strategy. Besides his dividend-bearing shares in the company, Desmarais earned fees from the companies he managed and from his outside directorships.”