Allegheny & Western Railway Co. (AWRY) - The perpetual $6 cash machine

This stock is another oddity from the Walker's Manual of unlisted stocks. Allengheny & Western Railway Company (AWRY) was founded in 1898 and has no business operations to speak of. The company simply owns a 62 mile piece of railroad line between Punxsutawney and Butler Junction in Pennsylvania which it leases out for a fixed fee.

Around 1900 AWRY leased the line to Rochester and Pittsburgh Railway for the duration of the firm's corporate existence at an annual rate of 6% on its $100 par value common stock. More recently the lease was acquired by CSX Transportation Inc who also acquired a 50.7% ownership interest in AWRY. Walker's speculates that CSX acquired the controlling interest to prevent shareholders from liquidating the company to realize any underlying value in the 62 miles of rail track.

Now to some numbers;

Market Cap = $3,316,800

Shares Outstanding = 32,000

Price per share = $103.65

Average Vol (30D) = 8

52WK Range = $103.55-$115.00

Dividend = $6 (Per Annum)

Dividend Yield = 5.79%

And now on to the chart

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As you can see, the best time to buy AWRY is when a bear market is under way. Back in the early part of 2001 after the dotcom bubble AWRY fell to $58.50 but was still spitting out $6 a year in dividends. Buying here would give you a 10.25% yield. Fast forward to early 2009 after the great financial crisis of 2008 and AWRY was trading at $66 for a 9.09% yield.

The problem here is liquidity, or rather the lack of it!

The best approach for interested parties would be to wait for a market panic to ensue and then place a GTC (Good till canceled) Limit order and wait to see if it gets filled.  Assuming history repeats, or at least rhymes, and AWRY gets beaten down in the next crisis the possibility exists to capture a safe 9-10% yield and the chance of $30-40 in capital appreciation as the stock price reverts back to around the $100 mark.

At the current price AWRY offers a guranteed 5.79% yield but there is unlikely to be any capital appreciation in the stock. Given the current bull market is at record length and evidently in its final stages a more favourable entry point is likely to materialize in the not too distant future.

For now this is one for the watch list.

Thanks for reading,

David

The author holds no fractional ownership in AWRY at the time of writing.