The Adams Express Company
The Adams Express Company
Sales: $77.8 million (2005)
Stock Exchanges: New York
Ticker Symbol: ADX
NAIC: 525990 Other Financial Vehicles
The Adams Express Company, a leading independent express delivery business for its first 75 years, is actually a closed-end investment firm. The conservative-minded Baltimore-based firm manages diversified equity portfolios for long-term investors. In 2006 Adams Express was able to report that it had paid dividends to its investors for 71 consecutive years. The company minimizes expenses and maximizes shareholder returns by managing its fund internally, without the involvement of a third-party investment adviser. Chairman Douglas Ober and President Joseph Truta have served as Adams Express’ portfolio managers for more than 20 years, assisted by a team of research analysts.
The history of Adams Express can be traced to July 1, 1854, when successful 50-year-old entrepreneur Alvin Adams formed the company in New York with $1.2 million in capital, organizing it as a limited stock company with 12,000 shares. Adams had operated a produce business that failed during the Panic of 1837. In order to support his growing family, which eventually included nine children, Adams attempted to establish a formal express service on the Boston & Norwich Railroad between Boston and New York. However, that privilege was eventually awarded to a man named William F. Harnden. Determined to succeed, Adams traveled between the two cities as a paying passenger, delivering parcels that he carried in a valise.
By 1840 Adams & Company consisted of little more than “two men, a boy and one wheelbarrow,” according to the corporate history The Adams Express Company: 150 Years. However, Adams’ tenacity soon paid off. A direct quote from Adams details how his once fledgling enterprise found the road to success: “In four years I was ahead of Harnden and about that time he died insolvent and Adams & Co. purchased his interest in the business and for 25 years, Adams & Co. have owned all the express lines between New York and Boston.”
Acquisitions and a growing base of loyal workers propelled Adams’ enterprise to new heights, and when Adams Express was formed in 1854 it absorbed Adams & Co., as well as eight other express businesses. In addition to serving the East Coast corridor, at this time the company’s reach stretched to coastal southern states, as well as to Pennsylvania, Ohio, and Maryland.
During the last half of the nineteenth century, Adams Express was involved in historical events such as the American Civil War and the California gold rush. In addition to delivering documents, messages, and securities related to these events, the company explains that it served as paymaster for both Union soldiers (via Adams Express) and Confederate soldiers (via its Southern Express Co. subsidiary).
Edward S. Sanford, Samuel M. Shoemaker, and William B. Dinsmore joined Alvin Adams as business partners in Adams & Co. during the early 1840s. At that time the company relocated to Baltimore, which served as an important U.S. transportation hub, and offices were established at 7 Light Street.
During the 1840s, stiff competition from independent mail carriers had a negative impact on the U.S. Postal Service. By 1845 the government had implemented protection so that only its postal service could deliver letters for a fee. Thus, Adams & Co. was forced out of the mail delivery market.
EARLY YEARS (1854–1917)
When Adams Express was formed on July 1, 1854, Alvin Adams served as the company’s first chairman. The following year, George W. Cass was named chairman, holding the position for two years. In 1857 Cass was succeeded by William Dinsmore, who led the enterprise until 1888. Adams Express grew rapidly during its first 20 years. By 1877 the company employed a workforce of 15,000 people and was valued at approximately $27 million. On September 1 of that year, Adams Express lost its founder when Alvin Adams passed away at the age of 73.
The company weathered a number of other challenges during its early years. Setbacks included a $678,000 train robbery in 1866, a fire that destroyed a St. Louis freight depot in December 1889, and a labor strike involving 600 workers in 1896. In addition, Adams’ fourth chairman, John Hoey (1888–1891), the former young boy who once delivered Alvin Adams’ packages by wheelbarrow, was removed from office due to what the company describes as “his flamboyant lifestyle and financial improprieties.” Hoey was succeeded by Henry Sanford, who served as chairman until 1894.
Levi C. Weir was named chairman of Adams Express in 1894 and led the enterprise into the 20th century. Weir was at the company’s helm when the Great Baltimore Fire of 1904 resulted in the total destruction of Adams Express’ corporate office. The company carried on, eventually moving to New York, and William M. Barrett took the reins from Weir five years later. Barrett retained the chairmanship for nearly 30 years, providing steady leadership during a period of rapid change.
World War I brought challenges for the nation, and Adams Express, during the first part of the 20th century. After reporting a surplus of $1.84 million in 1916, Adams recorded a deficit of $1.88 million the following year. On January 1, 1918, the government federalized the nation’s railroads, including the rail operations of U.S. express companies like Adams, in order to more effectively control the movement of troops and supplies.
On June 30, 1918, Adams, American Express, and Wells Fargo were sold to the government-controlled American Railway Express Company (AREC). As payment, each company received one-third of the shares in AREC. At this time Adams reported a deficit of $7.90 million. Following the sale to AREC, Adams ceased its foreign express operations. In addition, American Express acquired Adams’ money order and foreign exchange business.
Following the reprivitization of the railroads in 1920, AREC continued to operate into the late 1920s. In 1928 Adams, along with its Southern Express subsidiary, had net income of nearly $1.3 million, up $302,044 from 1927. The firm’s assets jumped from almost $2.12 million to $4.20 million, and the market value of its owned securities rose from $17.39 million to $29.81 million.
The Adams Express Company is a diversified equity investment company with a conservative investment philosophy suitable as a core holding for long-term investors. Structured as a closed-end fund since 1929, our investment objectives are preservation of capital, the attainment of reasonable income from investments, and an opportunity for capital appreciation.
On March 1, 1929, Adams, American Express, and Wells Fargo sold their respective shares of AREC to the newly formed Railway Express Agency Inc., a monopoly formed by 86 U.S. railroads. Following the $42 million cash deal, AREC adopted the new name, Railway & Express Company.
Adams Express had amassed a 75 percent ownership stake in AREC by acquiring American Express’ shares, and it eventually acquired additional shares from other shareholders. At this point, Adams Express had no physical transportation-related assets to speak of anymore; its holdings were concentrated in investments. Therefore, in October 1929 the company elected to operate as a closed-end investment fund. The time for this transition was certainly interesting, given that the stock market crashed on October 29, 1929, marking the start of the Great Depression.
THE DEPRESSION AND WAR YEARS
Although the Great Depression prevented Adams from paying dividends from 1932 to 1935, the company continued to make progress during these challenging years. Its investment holdings grew larger with the acquisition of the investment trust Haygart Corp. in 1930. The deal boosted Adams’ assets from about $52 million to $75 million. The Petroleum Corporation of America, later renamed Petroleum & Resources Corporation, became a noncontrolled affiliate of Adams.
In 1935 the company’s total income rose to $979,690, up from $837,339 the previous year, and cash-on-hand stood at $2.32 million, up from $455,438 the previous year.
Failing health prompted Chairman and President William M. Barrett to retire from his post in February 1936, and he died from a heart condition a month later. Barrett had established the company’s armored car service, one of the first services of its kind in the United States. Following his departure, Steele Mitchell was named chairman, and he led the firm through the remainder of the decade.
The 1940s brought new challenges, such as World War II, as well as more changes on the leadership front. Henry K. Smith was named president and chairman in 1940, serving until his death in 1943, when George M. Gillies, Jr., took the reins. It was during Gillies’ term, in December 1946, that the company sold its Southern Express Company subsidiary. Gillies remained at the helm until 1948, at which time the top leadership role went to George E. Clark, who would lead the firm until 1970.
According to the company, it was during the 1940s and 1950s that the firm adopted two key business practices that it continued to follow into the early 21st century. In addition to developing its own in-house research team, Adams implemented a long-term investment strategy. In The Adams Express Company: 150 Years, George E. Clark commented on this approach, stating: “The company is not interested in day-to-day or month-to-month trading operations. Rather, the emphasis is directed to longer-term investment policies, first for leading industries, then for leading companies in those.”
Adams ended the 1940s with net assets of roughly $38 million. This figure grew to $49 million in 1953, the same year that the Korean War came to a close.
STEADY GROWTH (1954–1999)
Adams celebrated its 100th anniversary in 1954, and assets exceeded the $68 million mark in 1955, setting a company record. According to the January 24, 1955, issue of the New York Times, at this time 4.98 percent of Adams’ investments were in government bonds. Some 18.79 percent of its stock portfolio, by value, was concentrated in the natural gas sector, followed by public utilities (6.70%), chemicals and drugs (6.63%), home furnishings and building equipment (4.99%), nonferrous metal (4.63%), steel and iron (3.86%), railroads and related equipment (3.30%), industrial and mining machinery (2.43%), and aviation (1.96%), with the remainder dispersed among other industries. In 1957 Adams reported a low expense-to-assets ratio of .45 percent, reflecting the company’s ability to minimize expenses.
- Entrepreneur Alvin Adams forms the company in New York with $1.2 million in capital.
- Adams Express, Wells Fargo, and American Express are sold to the government-controlled American Railway Express Company (AREC); each company receives one-third of AREC stock as payment.
- The three sell their respective shares of AREC to the newly formed Railway Express Agency Inc.; Adams Express elects to operate as a closed-end investment fund.
- Shareholders vote to change the company’s structure from a joint stock association to a corporation.
- Adams Express celebrates its 150th anniversary.
A number of important developments took place at Adams during the 1960s. In 1963 the company liquidated its Adamex Securities Corporation subsidiary. In June of the following year it liquidated its Adams Land & Development Corporation subsidiary. Mirroring a move that American Express took in mid-1965, in May 1968 Adams shareholders voted to change the company’s corporate structure to that of a corporation, as opposed to a joint stock association. Finally, on January 1, 1969, American International Corporation was acquired and made part of Adams.
Upon George E. Clark’s retirement in 1970, President David G. McCornack assumed the company’s chairmanship. He was succeeded the following year by W. David MacCallan, who had joined the firm in 1956 in a research capacity. According to Adams Express, MacCallan made a number of important contributions during his 20-year tenure in the top leadership position. These included expanding its investment in General Electric and bringing in a greater number of directors who were not connected with the investment field. It also was in 1971 that the company’s Petroleum Corporation of America affiliate named Robert G. Bennett as president.
Another development during the 1970s was Adams Express’ physical relocation. After maintaining offices in New York for many years, including a presence in the Adams Express Building at 61 Broadway, in 1976 the firm moved its offices to Baltimore, where it had once operated earlier in the century.
Adams Express’ net assets, which totaled $224.36 million in 1979, rose to $229.34 million in 1980. It was that year that Douglas G. Ober, a former Navy test pilot and aeronautical engineer who was educated at Princeton University, joined the company. Progress continued through the 1980s, despite challenges such as “Black Tuesday,” the stock market crash of October 19, 1987, that caused investors to lose approximately $500 billion. By the first quarter of 1990 net assets totaled $534 million, up from $482 million in the first quarter of 1989. Ober, who had by this time become vice-chairman, succeeded W. David MacCallan as CEO on April 1, 1990, and was named chairman the following year.
Adams Express’ leadership guided the company through an economic recession in the early 1990s. The company reduced its holdings in the telecommunications and utilities sectors, while increasing its investments in healthcare and other basic industries. Adams ended 1991 with assets of nearly $671 million. From total income of $54.67 million, Adams reported net income of $51.14 million. That year, about 66 percent of the company’s shareholders were over the age of 65 and had owned their stock for at least 20 years.
By the middle of the decade Adams’ assets had grown to $900 million, and in 1999 its assets exceeded $1.8 billion. That year the company’s board authorized a stock repurchase initiative, in an effort to boost shareholder value. In a news release, Douglas Ober revealed that, as of October 31, 1999, Adams had provided an average annual return of 22.2 percent over the previous five years.
INTO A THIRD CENTURY
Despite stock market volatility, Adams Express started the 21st century on solid footing, outperforming both the Standard & Poor’s 500 index and the Dow Jones Industrial Average through the nine months ending September 30, 2000. At this time the company reported a market value of $1.77 billion. During the early 2000s the company weathered an economic recession, which was made worse by the terrorist attacks against the United States on September 11, 2001.
In June 2002, Douglas Ober was named as president of the nonprofit Closed-End Fund Association Inc., an industry organization he helped to form in 1997 along with Lawrence Hooper, Adams’ general counsel. Two years later, the company reached a major milestone when it celebrated its 150th anniversary. Of the 46 closed-end funds that remained after the stock market crash of 1929, Adams and Petroleum & Resources Corporation were two of the six that remained. At this time, the majority of the firm’s shareholders continued to be of an older age.
As of September 30, 2006, Adams reported net assets of $1.34 billion, up from $1.29 billion the previous year. Following the NYSE Group’s merger with Archipelago Holdings, the parent company of NYSE Arca (formerly the Pacific Exchange), Adams Express withdrew its listing on NYSE Arca in January 2007 in order to avoid duplication in administrative requirements. The company continued to be listed on the New York Stock Exchange.
When Alvin Adams delivered parcels in his valise during the 1840s, it is unlikely he could have envisioned the successful evolution of his enterprise, which was largely influenced by the events of American and world history. He undoubtedly, however, would feel a sense of pride as the company moved toward its 200th birthday.
Paul R. Greenland
GAMCO Investors Inc., MACC Private Equities Inc., Renaissance Capital Group Inc.
“Adams Express Changes; H. K. Smith Succeeds Late Steele Mitchell as President,” New York Times, December 18, 1940.
“Adams Express Co. Chooses Chairman,” New York Times, October 19, 1970.
“Adams Express Co. Hard Hit by War,” New York Times, August 30, 1919.
“Adams Express Co. Reports for 1928,” New York Times, February 26, 1929.
“The Adams Express Company Fire,” Brooklyn Eagle, December 22, 1889.
The Adams Express Company: 150 Years, Baltimore, Md.: Adams Express, November 28, 2006.
“Adams Express Company to Pay Out Dividends, Interest Received on Holdings,” New York Times, April 26, 1949.
“Adams Express Daily Net Asset Value Available on NASDAQ,” PR Newswire, May 17, 1999.
“Adams Express Strike,” Brooklyn Eagle, August 24, 1896.
“Asset Record Set by Adams Express,” New York Times, January 24, 1955.
Bautz, Mark, “Why Closed-End Funds Are a Smart Move,” Money, September 1995.
“Gain Made in Year by Adams Express,” New York Times, January 17, 1936.
“G. M. Gillies Jr. Elected,” New York Times, June 16, 1943.
“A Great Case. First Extensive Robbery of the Adams Express Company,” Brooklyn Eagle, March 2, 1879.
“Haygart Approves Terms for Merger,” New York Times, January 1, 1930.
Kercheval, Nancy, “Stock Market Crash Survivor Adams Express Turns 150,” Daily Record, March 26, 2004.
“W. M. Barrett, Head of Adams Express,” New York Times, March 26, 1937.